nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2020‒08‒17
six papers chosen by

  1. Revenue Implications of Destination-Based Cash-Flow Taxation By Shafik Hebous; Alexander D Klemm; Saila Stausholm
  2. Bosnia and Herzegovina; Technical Assistance Report-Government Finance Statistics Mission By International Monetary Fund
  3. Has Higher Household Indebtedness Weakened Monetary Policy Transmission? By R. G Gelos; Tommaso Mancini Griffoli; Machiko Narita; Federico Grinberg; Umang Rawat; Shujaat Khan
  4. Optimal Taxation with Homeownership and Wealth Inequality By Borri, Nicola; Reichlin, Pietro
  5. Taxation and the External Wealth of Nations: Evidence from Bilateral Portfolio Holdings By Huizinga, Harry; Todtenhaupt, Maximilian; Voget, Johannes; Wagner, Wolf
  6. IRB Asset and Default Correlation: Rationale for the Macroprudential Add-ons to the Risk-Weights By Henry Penikas

  1. By: Shafik Hebous; Alexander D Klemm; Saila Stausholm
    Abstract: We estimate the revenue implications of a Destination Based Cash Flow Tax (DBCFT) for 80 countries. On a global average, DBCFT revenues under unchanged tax rates would remain similar to the existing corporate income tax (CIT) revenue, but with sizable redistribution of revenue across countries. Countries are more likely to gain revenue if they have trade deficits, are not reliant on the resource sector, and/or—perhaps surprisingly—are developing economies. DBCFT revenues tend to be more volatile than CIT revenues. Moreover, we consider the revenue losses resulting from spillovers in case of unilateral implementation of a DBCFT. Results suggest that these spillover effects are sizeable if the adopting country is large and globally integrated. These spillovers generate strong revenue-based incentives for many—but not all—other countries to follow the DBCFT adoption.
    Keywords: Tax revenue;Cash-flow taxes;Corporate taxation;Trade surpluses;Profits;Trade balances;Fiscal policy;Revenue measures;Balance of payments;Real effective exchange rates;Destination-Based Cash Flow Tax,Border Adjustment Tax,Business Taxes and Subsidies,International Fiscal Issues,trade balance,tax base,account data,border adjustment,revenue loss
    Date: 2019–01–15
  2. By: International Monetary Fund
    Abstract: This paper on Bosnia and Herzegovina presents the report on the government finance statistics technical assistance mission in Bosnia and Herzegovina. Further on developing reconciliation processes, the mission provisionally finalized research to establish reconciliation procedures, without fully eliminating statistical discrepancies. On the compiling of nonbudgetary public sector units, the mission continued the development of compilation processes as started during the May 2018 mission. Considering the differences in outcomes on balance sheet transactions between the ‘old’ and the ‘new’ compilation process, further research is required to test the plausibility of these compilation processes and outcomes. The mission will liaise with IMF’s European Department on an appropriate implementation procedure in coordination with other reporting units in Bosnia and Herzegovina that are also revising fiscal surveillance to the Government Finance Statistics Manual 2014 framework. The mission succeeded in resolving statistical discrepancies—at least from accounting technical point of view.
    Keywords: Financial statements;Balance sheets;Accounting procedures;Tax revenue;Social security funds;ISCR,CR,GFS,extrabudgetary,compilation process,reconciliation process,Republika Srpska
    Date: 2020–03–17
  3. By: R. G Gelos; Tommaso Mancini Griffoli; Machiko Narita; Federico Grinberg; Umang Rawat; Shujaat Khan
    Abstract: Has monetary policy in advanced economies been less effective since the global financial crisis because of deteriorating household balance sheets? This paper examines the question using household data from the United States. It compares the responsiveness of household consumption to monetary policy shocks in the pre- and post-crisis periods, relating changes in monetary transmission to changes in household indebtedness and liquidity. The results show that the responsiveness of household consumption has diminished since the crisis. However, household balance sheets are not the culprit. Households with higher debt levels and lower shares of liquid assets are the most responsive to monetary policy, and the share of these households in the population grew. Other factors, such as economic uncertainty, appear to have played a bigger role in the decline of households’ responsiveness to monetary policy.
    Keywords: Monetary policy;Household consumption;Monetary transmission mechanism;Balance sheets;Financial crises;Monetary policy instruments;Interest rate policy;Economic policy;transmission,households,real estate,leverage,Financial Markets and the Macroeconomy,Monetary Policy (Targets,Instruments,and Effects),Consumer Economics: Empirical Analysis,post-crisis,non-durable,consumption growth,indebtedness,liquid asset
    Date: 2019–01–15
  4. By: Borri, Nicola; Reichlin, Pietro
    Abstract: We consider optimal taxation in a model with wealth-poor and wealth-rich households, where wealth derives from business capital and homeownership, and investigate the consequences on these tax rates of a rising wealth inequality at steady state. The optimal tax structure includes some taxation of labor, zero taxation of financial and business capital, a housing wealth tax on the wealth-rich households and a housing subsidy on the wealth-poor households. When wealth inequality increases, the optimal balance between labor and housing wealth taxes depends on the source of the increasing wealth.
    Keywords: Housing; taxation; Wealth
    JEL: E21 E62 G1 H2 H21
    Date: 2019–11
  5. By: Huizinga, Harry; Todtenhaupt, Maximilian; Voget, Johannes; Wagner, Wolf
    Abstract: This paper examines the impact of capital income taxation on the composition of foreign portfolio investment. Studying bilateral portfolio positions among a sample of 37 countries over the period 2001-2015, we find that capital gains and dividend taxation reduce the share of equities in foreign investments, while interest taxation increases this share. The results suggest that domestic capital income taxation affects the worldwide asset allocation of domestic investors. The estimated tax sensitivities imply a significant increase in country's external wealth following a tax policy change that stimulates investors to hold higher-yielding equity investments.
    Keywords: asset allocation; Capital income taxation; Foreign portfolio investment
    JEL: G11 H24
    Date: 2019–11
  6. By: Henry Penikas (Bank of Russia, Russian Federation)
    Abstract: Basel III allows for the use of statistical models. It is called the internal-ratings-based (IRB) approach and is based on the (Vasicek, 2002) model. It assumes assets returns are standard normally distributed. It suggests incorporating different asset correlation (R) functions to assess credit risk for the loan portfolio, or the risk-weighted assets (RWA). The asset correlation func-tion solely depends on the individual default probability (PD) given certain credit exposure type. At the same time, the IRB approach requires developing PD models to predict the dis-crete default event occurrence. This means that the IRB approach is based on the Bernoulli trials. We investigate the impact of the asset returns’ correlation for the Bernoulli trials. We show that when Bernoulli trials are considered, the credit risk estimation significantly deviate from the val-ues derived under the normality assumption of asset returns. We investigate the simulated and real-world credit rating agencies’ data to specifically demonstrate the scale of the credit risk underestimation by the IRB approach. Therefore, macroprudential add-ons are of use to offset such IRB limitations.
    Keywords: Basel II, IRB, correlated defaults, asset correlation, binomial distribution, Bernoulli trials, macroprudential add-ons (mark-ups)
    JEL: C25 G21 G28 G32 G33
    Date: 2020–07

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.