nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2020‒11‒09
eight papers chosen by

  1. Attracting Profit Shifting or Fostering Innovation? On Patent Boxes and R&D Subsidies By Andreas Haufler; Dirk Schindler
  2. Taxation of Household Capital in EU Member States Impact on Economic Efficiency, Revenue and Redistribution By Savina Princen; Athena Kalyva; Alexander Leodolter; Cécile Denis; Adriana Reut; Andreas Thiemann; Viginta Ivaskaite-Tamosiune
  3. Corporate Effective Tax Rates for Research and Policy By Petr Jansky
  4. Analysis of Factors Affecting Implementation of Entity Financial Accounting Standards without Public Accountability (SAK ETAP) in Middle Small Micro Businesses (UMKM) District in Indragiri District Region By UNISI, Fakultas Pertanian
  5. The influence of financial markets on accounting standards: A historical reading By Issam Benhayoun; M. Marghich Abdellatif
  6. Is Image Encoding Beneficial for Deep Learning in Finance? An Analysis of Image Encoding Methods for the Application of Convolutional Neural Networks in Finance By Dan Wang; Tianrui Wang; Ionu\c{t} Florescu
  7. Liquidity, Interbank Network Topology and Bank Capital By Aref Ardekani
  8. Russia’s banking sector in 2019 By Zubov Sergey

  1. By: Andreas Haufler; Dirk Schindler
    Abstract: Many countries have introduced patent box regimes in recent years, offering a reduced tax rate to businesses for their IP-related income. Patent boxes are supposed to increase innovative activity, but they are also suspected to aim at attracting inward profit shifting from multinational firms. In this paper, we analyze the effects of patent box regimes when countries can simultaneously use patent boxes and R&D subsidies to promote innovation. We show that when countries set their tax policies unilaterally, innovation is fostered, at the margin, only by the R&D subsidy. The patent box tax rate is instead targeted at attracting international profit shifting, and it is optimally set below the corporate tax rate. With cooperative tax setting, the optimal royalty tax rate is instead equal to, or even above, the statutory corporation tax. Hence, patent box regimes emerge in the decentralized policy equilibrium, but never under policy coordination. Enforcing a nexus principle, as proposed by the OECD, is helpful to mitigate harmful competition for paper profits, but it comes at the price of increased strategic competition in direct R&D subsidies to attract physical R&D units instead of intangible patents.
    Keywords: R&D investment, patent boxes, investment tax credits, profit shifting, tax competition
    JEL: H25 H87 F23
    Date: 2020
  2. By: Savina Princen; Athena Kalyva; Alexander Leodolter; Cécile Denis; Adriana Reut; Andreas Thiemann; Viginta Ivaskaite-Tamosiune
    Abstract: Taxation of capital, including the taxation of capital income and stocks, could play an important role in increasing revenue efficiency and making the tax system fairer. Recent international tax developments on automatic exchange of information and administrative co-operation have increased the capacity of Member States to raise taxes from mobile tax bases such as capital income. This paper first analyses the tax treatment of household capital income. It presents the theoretical features of the optimal taxation of capital income and describes the tax treatment of income from different capital assets in EU Member States. The paper then focusses on the taxation of owner-occupied housing and measures the impact of specific tax features on the cost of home ownership by using an indicator-based analysis. Then, it analyses specific issues in capital gains taxation and their macroeconomic effects. Finally, the paper explores the possibilities of increasing revenue efficiency through wealth transfer taxes, i.e. inheritance and gift taxes. It provides an up-to-date review of the theoretical arguments and the practical implementation of such taxes in EU Member States and tries to shed light on the reasons why these taxes contribute only little to raising revenues.
    JEL: D1 D2 D3 E6 H2 H21 J08 J2
    Date: 2020–08
  3. By: Petr Jansky (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic)
    Abstract: How much companies pay in corporate income taxes is often better captured by effective tax rates (ETRs) rather than by statutory ones. Economists further distinguish between those modelled using the law – forward-looking ETRs – and those estimated from actual data on companies’ profits and taxes – backward-looking ETRs. Moving beyond this binary distinction, I present a spectrum where backward-looking ETRs are further broken down by the type of data used to estimate them and where all ETRs may be located along with applicable statutory rates. Within that spectrum, I focus on backward-looking ETRs and, specifically, on those estimated using companies’ balance sheet databases. Based on my review of recent findings, I argue that backward-looking ETRs – of multinational corporations in particular – have become more frequently estimated thanks to advances in data availability while also becoming more relevant as a result of ongoing global corporate tax reform debates. Ultimately, I argue that the full range of various ETRs can play a useful role in both research and policy.
    Keywords: corporate income tax; effective tax rate; forward-looking effective tax rate; backward-looking effective tax rate; multinational corporation; profit shifting
    JEL: C81 F21 F23 H25 H26
    Date: 2020–10
  4. By: UNISI, Fakultas Pertanian
    Abstract: This study aims to determine and empirically test the effect of providing information and outreach, educational background and business scale on the understanding of MSMEs in preparing financial reports based on SAK ETAP at MSMEs Tembilahan District, Indragiri Hilir Regency, Riau. The sample of this study were 63 MSMEs in the gold, cellphone, drug and electronic trading sectors in Tembilahan District, Indragiri Hilir Riau District. Data collection techniques used the Surver Method. This study uses the data analysis method of Multiple Linear Regression using SPSS Version 26. Partial hypothesis test results show that the provision of information and socialization have no effect on MSME understanding in preparing financial reports based on SAK ETAP on MSMEs Tembilahan District, Indragiri Hilir Riau District, educational background influences the understanding of MSMEs in preparing financial reports based on SAK ETAP at UMKM Tembilahan District, Indragiri Hilir Riau District, and the business scale influences the understanding of MSMEs in preparing financial reports based on SAK ETAP on MSMEs Tembilahan District, Indragiri Hilir Riau Regency. Hypothesis test results simultaneously providing information and outreach, educational background and business scale simultaneously affect the understanding of MSMEs in preparing financial reports based on SAK ETAP at MSMEs Tembilahan District, Indragiri Hilir Regency, Riau. The coefficient of determination of 43.8% shows that the understanding of MSMEs in preparing financial reports based on SAK ETAP at MSMEs Tembilahan District, Indragiri Hilir Riau District is influenced by the provision of information and socialization, educational background and business scale of 43.8%, while the remaining 56 , 2% is influenced by other variables not examined in this study.
    Date: 2020–10–07
  5. By: Issam Benhayoun (ENCGF - Ecole Nationale de Commerce et de Gestion De Fès - USMBA - Université Sidi Mohamed Ben Abdellah); M. Marghich Abdellatif (ENCGF - Ecole Nationale de Commerce et de Gestion De Fès - USMBA - Université Sidi Mohamed Ben Abdellah)
    Abstract: Globalization of businesses and financial market have brought to light what is called nowadays International accounting standardization. The latter has seen the light since the initiative of Henry Benson to gather many countries around the world to prepare a core of accounting standards that could be possible to apply globally, or at least by countries who had participated in their preparation. The main purpose of this study is to analyze this phenomenon from a historical standpoint to help answer how international accounting standardization were developed and under which conditions. The main findings indicate that international accounting standardization was developed based on financial markets requirements and needs rather than purely accounting matters.
    Abstract: La mondialisation des entreprises et des marchés financiers ont mis en lumière ce que l'on appelle aujourd'hui la normalisation comptable internationale. Cette dernière a vu le jour depuis l'initiative d'Henry Benson de rassembler de nombreux pays à travers le monde pour préparer un noyau de normes comptables qu'il serait possible d'appliquer globalement, ou du moins par les pays ayant participé à leur élaboration. L'objectif principal de cette étude est d'analyser ce phénomène d'un point de vue historique pour aider à comprendre comment la normalisation comptable internationale a été développée et dans quelles conditions. Les principales constatations indiquent que la normalisation comptable internationale a été élaborée en fonction des exigences et des besoins des marchés financiers plutôt que sur des questions purement comptables.
    Keywords: Harmonization,International standardization,accounting standards,IASB,IFRS,Harmonisation,normalisation internationale,normes comptables
    Date: 2020
  6. By: Dan Wang; Tianrui Wang; Ionu\c{t} Florescu
    Abstract: In 2012, SEC mandated all corporate filings for any company doing business in US be entered into the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. In this work we are investigating ways to analyze the data available through EDGAR database. This may serve portfolio managers (pension funds, mutual funds, insurance, hedge funds) to get automated insights into companies they invest in, to better manage their portfolios. The analysis is based on Artificial Neural Networks applied to the data.} In particular, one of the most popular machine learning methods, the Convolutional Neural Network (CNN) architecture, originally developed to interpret and classify images, is now being used to interpret financial data. This work investigates the best way to input data collected from the SEC filings into a CNN architecture. We incorporate accounting principles and mathematical methods into the design of three image encoding methods. Specifically, two methods are derived from accounting principles (Sequential Arrangement, Category Chunk Arrangement) and one is using a purely mathematical technique (Hilbert Vector Arrangement). In this work we analyze fundamental financial data as well as financial ratio data and study companies from the financial, healthcare and IT sectors in the United States. We find that using imaging techniques to input data for CNN works better for financial ratio data but is not significantly better than simply using the 1D input directly for fundamental data. We do not find the Hilbert Vector Arrangement technique to be significantly better than other imaging techniques.
    Date: 2020–10
  7. By: Aref Ardekani (UP1 - Université Panthéon-Sorbonne, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UNILIM - Université de Limoges)
    Abstract: By applying the interbank network simulation, this paper examines whether the causal relationship between capital and liquidity is influenced by bank positions in the interbank network. While existing literature highlights the causal relationship that moves from liquidity to capital, the question of how interbank network characteristics affect this relationship remains unclear. Using a sample of commercial banks from 28 European countries, this paper suggests that banks' interconnectedness within interbank loan and deposit networks affects their decisions to set higher or lower regulatory capital rations when facing higher illiquidity. This study provides support for the need to implement minimum liquidity ratios to complement capital ratios, as stressed by the Basel Committee on Banking Regulation and Supervision. This paper also highlights the need for regulatory authorities to consider the network characteristics of banks.
    Keywords: Interbank network topology,Bank regulatory capital,Liquidity risk,Basel III
    Date: 2020–10
  8. By: Zubov Sergey (RANEPA)
    Abstract: At 2019-end, Russian banking sector numbered 442 lending institutions. Over the year the number of operational lending institutions decreased by 42 (in 2018 – down by 77). Seven years ago in early 2013 the number of operational institutions exceeded one thousand (1094). Consequently, the Central Bank of Russia consistently has been conducting the bank resolution process. As of January 1, 2020, 373 lending institutions’ profit hit RUB 2,196.4 billion and losses of 69 banks amounted to RUB 159.6 billion. On the whole, the share of loss-making institutions over the year went down from 29 to 16 percent.
    Keywords: Russian economy, banking sector, profit, capital, corporate loans, retail lending
    JEL: E41 E51 G28 G21 G24
    Date: 2020

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