nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2020‒09‒28
six papers chosen by

  1. Nudging for Tax Compliance: A Meta-Analysis By Armenak Antinyan; Zareh Asatryan
  2. Clearing the Bar: Improving Tax Compliance for Small Firms through Target Setting By Yazan Al-Karablieh; Evangelos Koumanakos; Stefanie Stantcheva
  3. Do Countries Really Deviate from the Optimal Tax System? By Cristian F. Sepulveda
  4. Forensic accounting theory By Ozili, Peterson K
  5. Forward looking loan provisions: Credit supply and risk-taking By Bernardo Morais; Gaizka Ormazabal; José-Luis Peydró; Mónica Roa; Miguel Sarmiento
  6. In Living Color: Does In-Person Screening Affect Who Gets Hired? By John Manuel Barrios; Laura Giuliano; Andrew J. Leone

  1. By: Armenak Antinyan; Zareh Asatryan
    Abstract: Tax compliance nudges are used increasingly by governments because of their perceived cost-effectiveness in raising tax revenue. We collect about a thousand treatment effect estimates from 45 randomized controlled trials, and synthesize this rapidly growing literature using meta-analytical methods. We show that interventions pointing to elements of individual tax morale are on average ineffective in curbing tax evasion (when evaluated against a control group of taxpayers receiving neutral communication). In contrast, deterrence nudges - interventions emphasizing traditional determinants of compliance such as audit probabilities and penalty rates - increase compliance. However, their effects are modest in magnitude increasing the probability of compliance by 1.5-2.5 percentage points more than non-deterrence nudges. Our additional results suggest that nudges i) work better on sub-samples of late payers and when delivered in-person, ii) are less effective in the long-run and in lower-income countries, and iii) are somewhat inflated by selective reporting of results.
    Keywords: tax compliance, randomized control trials, nudging, tax morale, meta-analysis
    JEL: C93 D91 H26
    Date: 2020
  2. By: Yazan Al-Karablieh; Evangelos Koumanakos; Stefanie Stantcheva
    Abstract: We use a new dataset consisting of the universe of Greek corporate tax returns matched to financial statements to study a voluntary tax compliance program for small firms. This “self-assessment” program prescribed target taxable profit margins for different types of activity. Firms that reported profit margins above these targets in a given year were exempt from audits in that year. We find that the firms that take-up the program report significantly larger taxable profits than non-eligible firms, with some evidence of longer-lasting effects on tax reporting. Taxable profits increase by up to 70% of their pre-program levels. We also find that firms can easily and substantially manipulate reported revenue (decreasing it by up to 40%) to help meet prescribed profit margins. Overall, the program increased tax revenues collected from small firms, but points to a very large level of baseline under-reporting of profits and the ease of manipulating reported revenues.
    JEL: H20 H25 H26
    Date: 2020–09
  3. By: Cristian F. Sepulveda (Department of Economics, Farmingdale State College, State University of New York, USA)
    Abstract: One of the main goals of the literature on optimal tax systems is to reduce the gap between the highly stylized theory of optimal taxation and the practice of fiscal policy reform. Unfortunately, however, we know little about the extent to which the international experience follows the policy prescriptions derived from economic theory or how those policy prescriptions would change with economic development. Based on the standard theory of optimal tax systems, this paper predicts the possible effects of economic development on the optimal level and composition of tax revenue and empirically tests these predictions with yearly data on three tax instruments from countries at different stages of development. On average, as countries develop they are shown to collect more tax revenue and switch from regressive tax instruments, like the value added tax, to more progressive taxes that become more productive with development, like personal and corporate income taxes.
    Date: 2020–09
  4. By: Ozili, Peterson K
    Abstract: This article presents a forensic accounting theory. Forensic accounting theory is an explanation of why and how the choice of methods and techniques used to detect creative accounting or fraudulent manipulations in financial reporting, and the outcome of using such methods or techniques, depends on the accounting and non-accounting decisions taken into consideration by the forensic accountant or investigator. The forensic accounting theory developed in this paper is useful to both practitioners and academics, and the resulting contribution to accounting theory and forensic science are useful to the problem-solving process in the global fight against financial crime.m
    Keywords: fraud, forensic accounting, financial reporting, fraud detection, forensic accounting theory, accounting, financial accounting, forensic science, accounting education, forensic accountant.
    JEL: M4 M40 M42
    Date: 2020–06–12
  5. By: Bernardo Morais; Gaizka Ormazabal; José-Luis Peydró; Mónica Roa; Miguel Sarmiento
    Abstract: We show corporate-level real, financial, and (bank) risk-taking effects associated with calculating loan provisions based on expected-rather than incurred-credit losses. For identification, we exploit unique features of a Colombian reform and supervisory, matched loan-level data. The regulatory change induces a dramatic increase in provisions. Banks tighten all new lending conditions, adversely affecting borrowing-firms, with stronger effects for risky-firms. Moreover, to minimize provisioning, more affected (less-capitalized) banks cut credit supply to risky-firms- SMEs with shorter credit history, less tangible assets or more defaulted loans-but engage in "search-for-yield" within regulatory constraints and increase portfolio concentration, thereby decreasing risk diversification.
    Keywords: Loan provisions, IFRS9, ECL, corporate real and credit supply effects of accounting, bank risk-taking
    JEL: E31 G18 G21 G28
    Date: 2020–08
  6. By: John Manuel Barrios (University of Chicago - Booth School of Business); Laura Giuliano (UC Santa Cruz); Andrew J. Leone (Northwestern University)
    Abstract: When hiring new workers, employers often screen large numbers of written applications before selecting a subset for more costly, in-person interviews. A large literature suggests that information frictions lead to screening on imperfect quality signals - e.g., educational pedigree and network-based referrals - and that these practices can perpetuate labor-market inequities. In theory, a reduction in the cost of in-person screening could lead to improvements in both efficiency and equity by reducing the use of blunt signals that disadvantage certain groups. We test this hypothesis by studying the introduction of a labor-market intermediary, the Accounting Rookie Camp (ARC), that greatly facilitated in-person screening in the labor market for PhD accountants. Using a novel data set with information on new PhDs, recruiters and market outcomes over 11 years, we estimate difference-in-difference models that leverage variation in the timing of ARC adoption. We find that degree program rank and adviser connectedness are strong predictors of initial job placements, but that their impacts are significantly reduced by participation in ARC. The results suggest that the historical returns to program reputation and adviser networks were driven partly by their signaling values, which were reduced by new the information channels created by ARC. They also indicate that in some respects, ARC adoption helped foster greater diversity in hiring. At the same time, we find no evidence that ARC reduced existing disparities in placements by gender and only weak evidence that it benefited under-represented minorities. Finally, using names to predict nationality and native language, we find that ARC led to worse placements for candidates whose native language is very different from English.
    Keywords: Job Matching, Screening, Signaling, Hiring, Networks, Imperfect Information, In-Person Interview, Academic Labor Market
    JEL: D83 J7 J23 J44 M51
    Date: 2020

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