nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2021‒08‒09
eleven papers chosen by

  1. Taxation trends in the European Union: 2021 edition By European Commission
  2. Revealing Corruption: Firm and Worker Level Evidence from Brazil By Colonnelli, Emanuele; Lagaras, Spyridon; Ponticelli, Jacopo; Prem, Mounu; Tsoutsoura, Margarita
  3. Corporate effective tax rates for R&D: The case of expenditure-based R&D tax incentives By Ana Cinta González Cabral; Silvia Appelt; Tibor Hanappi
  4. CSR, audit quality and firm performance during COVID-19: an organizational legitimacy perspective By Yadav, Sandeep; Srivastava, Jagriti
  5. Discount Rates in Accounting: How Practitioners Depart the IFRS Maze. Towards the End of Determinism in Accounting By Véronique Blum; Pierre-Emmanuel Thérond
  6. Rewarding good taxpayers, an effective mechanism? By Pedro A. Cabra-Acela
  7. Why Minimum Corporate Income Taxation Can Make the High-Tax Countries Worse off: the Compliance Dilemma By Yukihiro NISHIMURA; Jean HINDRIKS
  8. Statistical Measurement of Illicit Financial Flows in Sustainable Development Goals: Tax Avoidance by Multinational Corporations By Alex Cobham; Javier Garcia-Bernardo; Petr Jansky; Miroslav Palansky
  9. A Incid\^encia Final dos Tributos Indiretos no Brasil: Estimativa Usando a Matriz de Insumo-Produto 2015 By Rozane Bezerra de Siqueira; Jos\'e Ricardo Bezerra Nogueira; Carlos Feitosa Luna
  10. America’s Regressive Wealth Tax: State and Local Property Taxes By Arik Levinson
  11. “The Concept of Value in Corporate Governance: Central!” By Valérie Charolles

  1. By: European Commission
    Abstract: This report contains a detailed statistical and economic analysis of the tax systems of the Member States of the European Union, plus Iceland and Norway, which are Members of the European Economic Area. The data are presented within a unified statistical framework (the ESA2010 harmonised system of national and regional accounts), which makes it possible to assess the heterogeneous national tax systems on a fully comparable basis.
    Keywords: European Union, taxation
    JEL: H23 H24 H25 H27 H71
    Date: 2021–07
  2. By: Colonnelli, Emanuele; Lagaras, Spyridon; Ponticelli, Jacopo; Prem, Mounu; Tsoutsoura, Margarita
    Abstract: We study how the disclosure of corrupt practices affects firms. We construct novel firm-level measures of involvement in corrupt practices using randomized audits of public procurement in Brazil. On average, firms exposed by the anti-corruption program grow larger after the audits, despite experiencing a decrease in procurement contracts. Using investment-, loan-, and worker- level data, we show that exposed firms adapt to the loss of government contracts by changing their investment strategy. They increase capital investment and borrow more to finance such investment, while we see no change in their internal organization. We provide qualitative support to our results by conducting new face-to-face surveys with business owners of government-dependent firms.
    Keywords: Anti-corruption program; Audits; Corruption; Firms; Brazil
    JEL: G D73
    Date: 2021–08
  3. By: Ana Cinta González Cabral; Silvia Appelt; Tibor Hanappi
    Abstract: R&D tax incentives have become a widely used policy tool to promote business R&D. How do they shape firms’ incentives to invest in R&D? This paper contributes a methodology to construct forward-looking effective tax rates for an R&D investment that reflect the value of expenditure-based R&D tax incentives. The new OECD estimates cover 48 countries and consider the case of large profitable firms, accounting for the bulk of R&D in most economies. The results provide new insights into the generosity of R&D tax incentives from the perspective of firms that decide on whether or where to invest in R&D (extensive margin) and the level (intensive margin) of R&D investment. The generosity of the favourable tax treatment of R&D is shown to vary at the intensive and extensive margins, highlighting differences in countries’ strategies to support R&D through the tax system.
    JEL: H25 H2 O3 H
    Date: 2021–07–29
  4. By: Yadav, Sandeep; Srivastava, Jagriti
    Abstract: Purpose - COVID-19 induced uncertainty in the firms’ business transactions, product-market competition and financial market cause severe organizational legitimacy crisis. Using the organizational legitimacy perspective, we study the relationship between corporate social responsibility (CSR) activities, audit quality, and firm performance. Design/methodology/approach – We use a quarterly panel of 89,185 firm observations (15,955 unique firms) from 131 countries from July 2018 to December 2020 for 10 quarters. We use a Difference-in-Difference (DiD) method to estimate the effect of CSR activities and audit quality on firm performance during the COVID-19 period. Findings - We find a U-shaped relationship between CSR and firm performance. This relationship is strengthened during COVID-19. In contrast, we find an inverted U-shaped relationship between firm audit quality (audit fee) and firm performance. However, this relationship is weakened during the pandemic. Originality/value – Our study makes important contributions to theory and practice on maintaining organizational legitimacy during the pandemic. During the crisis, managers need to focus on strategies increasing firm value for the time period. This study shows that firms’ temporal legitimacy gaining practices such as CSR activities and audit quality provides an opportunity to increase firm value. Firm managers also need to identify the optimal level of CSR activities and audit fees to balance the cost of agency and the benefits of legitimacy.
    Keywords: CSR, audit quality, COVID-19, firm performance, organizational legitimacy
    JEL: M14 M42
    Date: 2021–06
  5. By: Véronique Blum (UGA - Université Grenoble Alpes); Pierre-Emmanuel Thérond (SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon, SeaBird)
    Keywords: IFRS,accounting,fair value,discount rate
    Date: 2021–07–09
  6. By: Pedro A. Cabra-Acela
    Abstract: In this paper, I examine the conditions under which rewarding honest taxpayers is an optimal mechanism to reduce tax evasion and improve collection. My theoretical model suggests that when it is expensive to audit contributors, and moral (or pecuniary) evasion cost is high enough, rewarding tax compliance is an effective strategy to increase collection. I provide empirical evidence from Argentina’s province variation of rewards policies and tax collection. Where the data suggests that theoretical conditions hold, I find a positive effect in real estate per capita tax collection between 0.4 and more than 2 standard deviations.
    Keywords: Tax evasion, good taxpayer, rewards, fiscal policy, Argentina.
    JEL: H21 H26 H30
    Date: 2021–07–09
  7. By: Yukihiro NISHIMURA (Graduate School of Economics, Osaka University); Jean HINDRIKS
    Abstract: Minimum taxation means that if a multinational enterprise (MNE) declares its operations in a jurisdiction taxing less than the minimum tax, the countries where the real economic activity takes place would have the right to tax the difference. There is a revival of the minimum tax standard for two reasons. First, there is concern about the complexity of assigning taxing rights and the effectiveness of profit-splitting rules in eliminating profit shifting. Second, the minimum tax standard has the merit of tackling multinational tax avoidance at its root. However, this argument ignores the strategic interaction between minimum taxation and tax compliance. Building upon Hindriks and Nishimura (2021), we develop a framework in which effective international tax compliance requires enforcement coordination between countries (e.g. exchange of information). We show that under sufficient market asymmetry (translating into the tax differential), minimum taxation may induce the low-tax countries to withdraw from international tax compliance agreements. We then show that such a breakdown of cooperation can make the high-tax country worse off compared to the absence of minimum taxation.
    Keywords: Profit shifting; Tax competition; Tax enforcement;
    JEL: C72 F23 F68 H25 H87
    Date: 2021–07
  8. By: Alex Cobham (Tax Justice Network); Javier Garcia-Bernardo (Tax Justice Network & Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Petr Jansky (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Miroslav Palansky (Tax Justice Network & Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: Illicit financial flows (IFFs) threaten countries´ ability to achieve the Sustainable Development Goals (SDGs). Progressing on the IFFs target is thus crucial, as is the ability to measure achieved progress. In this paper we explore how to best statistically measure tax avoidance by multinational corporations (MNCs) as the SDGs IFFs target. Our main research question is how the best available methods for the statistical measurement of tax avoidance by MNCs reconcile with the Balance of Payments (BoP) statistics. We answer the research question using a combination of approaches, arriving at three main findings. First, we show that the three leading methods for estimating tax avoidance by MNCs are closely related to each other, theoretically as well as empirically. Second, the profit misalignment method applied to the country-by-country reporting (CBCR) data of large MNCs emerges as the most suitable method from a critical review of existing approaches and a range of available statistical data sources. Third, in their current state the BoP statistics are not suitable for estimating tax avoidance by MNCs for many countries due lacking country coverage and missing data. On the basis of our findings, we recommend piloting the use of confidential MNC-level CBCR data to estimate tax avoidance by MNCs as the SDGs IFFs target.
    Keywords: illicit financial flows; multinational corporations; tax avoidance; balance of payments; country-by-country reporting; Sustainable Development Goals
    JEL: H25 H26 O23 O24
    Date: 2021–07
  9. By: Rozane Bezerra de Siqueira; Jos\'e Ricardo Bezerra Nogueira; Carlos Feitosa Luna
    Abstract: Taxes on goods and services account for about 45% of total tax revenue in Brazil. This tax collection results in a highly complex system, with several taxes, different tax bases, and a multiplicity of rates. Moreover, about 43% of taxes on goods fall on inputs. In this context, the effective tax rates can substantially differ from the legal rates. In this study we estimate the final incidence of indirect taxes in Brazil using the 2015 Brazilian input-output matrix and a method that incorporates the multisector effects of the taxation of inputs.
    Date: 2021–07
  10. By: Arik Levinson (Department of Economics, Georgetown University)
    Abstract: Most taxes in the United States are levied on income flows, not capital stocks. One notable exception is state and local property taxes. This note documents their magnitude and regressivity. Property taxes account for more than 30 percent of state and local tax revenue, and amount to an effective wealth tax rate of 0.86 percent on the assets of the median US homeowner. The effective property-wealth tax rates are highest for younger, lower-income homeowners.
    Keywords: Inequality, wealth tax, property tax
    JEL: H2 H7
    Date: 2021–07–12
  11. By: Valérie Charolles (DEFI - Département Droit, Economie et Finances - IMT - Institut Mines-Télécom [Paris] - TEM - Télécom Ecole de Management - IMT-BS - Institut Mines-Télécom Business School, IIAC - Institut interdisciplinaire d'anthropologie du contemporain - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique, LASCO - Laboratoire Sens et Compréhension du Monde Contemporain - IMT - Institut Mines-Télécom [Paris] - IMT Atlantique - IMT Atlantique Bretagne-Pays de la Loire - IMT - Institut Mines-Télécom [Paris] - IMT-BS - Institut Mines-Télécom Business School - Mines Saint Etienne)
    Abstract: Scholarly Debate on "The concept of value in corporate governance: central or useless?». With: 1/ Prof. Valérie Charolles, researcher in philosophy at ITM-BS, associate researcher at the Laboratoire d'Antropologie Critique Interdisciplinaire 2/ Prof. Marianna Fotaki, professor of business ethics at the University of Warwick Business School 3/ Prof. Morten Huse, Professor of Organisation and Management, Department of Communication and Culture, BI Norwegian Business School 4/ Charles Okehalam, Phd, co-founder of the investment group, AGH Capital, South Africa The debate primarily aims to initiate a dialog that: Promotes active, constructive exchanges between proponents on emerging issues, theories, and modes of inquiry regarding value. Presents a well-articulated academic conversation around the topic. A conversation that is important, relevant, and at the heart of a debate that is consequential for theory and practice. Seeks to provide depth or texture to a relevant academic debate, including contradictory points of view. Provide consistent intellectual material that would relate to and reshape practice
    Keywords: Value,Governance,Accounting,Wittgenstein
    Date: 2021–03–25

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