nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2021‒08‒30
nine papers chosen by
Alexander Harin
Modern University for the Humanities

  1. Internal Audit Effectiveness in the Moroccan Public Sector: An Theoretical Approach By Safae Ed-Douadi; Chafik Bakour
  2. Collecting the tax deficit of multinational companies simulations for the European Union By Mona Barake; Theresa Neef; Paul-Emmanuel Chouc; Gabriel Zucman
  3. Is consistency the panacea? Inconsistent or consistent tax transfer prices with strategic taxpayer and tax authority behavior By Diller, Markus; Lorenz, Johannes; Schneider, Georg; Sureth, Caren
  4. Tax Losses and Ex-ante Offshore Transfer of Intellectual Property By Rishi R. Sharma; Joel Slemrod; Michael Stimmelmayr
  5. Electoral Competition, Accountability and Corruption:Theory and Evidence from India By Farzana Afridi,; Sourav Bhattacharya,; Amrita Dhillon,; Eilon Solan,
  7. Cryptocurrencies: An empirical view from a Tax Perspective By Andreas Thiemann
  8. Administering the Value-Added Tax on Imported Digital Services and Low-Value Imported Goods By John Brondolo
  9. Does financial inclusion reduce non-performing loans and loan loss provisions? By Ozili, Peterson Kitakogelu; Adamu, Ahmed

  1. By: Safae Ed-Douadi (Ecole Nationale de Commerce et de Gestion Tanger - UAE - Université Abdelmalek Essaâdi); Chafik Bakour (Ecole Nationale de Commerce et de Gestion Tanger - UAE - Université Abdelmalek Essaâdi)
    Abstract: In light of the changes experienced by the internal audit function, mainly that linked to the extension of its scope marked by the transition from the private sector to the public sector, another challenge for the function arises. is about its ability to be effective. The effectiveness of internal auditing, admittedly a concept that has started to receive special attention in the literature, but so far there is no consensus among researchers as to the best framework for the effectiveness of internal audit, and the factors that affect it. In this regard, the objective of this article is to propose a theoretical framework of internal audit effectiveness which includes: stakeholder theory, strategic actor theory, institutional theory and communication theory, as well as to propose a conceptual model, based on the logic of the four theories and on the literature, which assumes the existence of an influencing relationship between four factors (characteristics of listeners, support from senior management, quality of the internal audit function, the auditor-auditee relationship) and the effectiveness of the internal audit.
    Abstract: À la lumière des évolutions qu'a connues la fonction audit interne, principalement celle liée à l'extension de son champ d'application marqué par le passage du secteur privé au secteur public, un autre défi pour la fonction se présente, il s'agit de sa capacité à être efficace. L'efficacité de l'audit interne, certes que c'est un concept qui a commencé à faire l'objet d'une attention particulière de la littérature, mais jusqu'à présent, il n'existe pas de consensus entre les chercheurs quant au meilleur cadre pour l'efficacité de l'audit interne, et aux facteurs qui l'affectent. À cet égard, l'objectif du présent article est de proposer un cadre théorique d'efficacité de l'audit interne qui inclut : la théorie des parties prenantes, la théorie de l'acteur stratégique, la théorie institutionnelle et la théorie de communication, ainsi que de proposer un modèle conceptuel, en se basant sur la logique des quatre théories et sur la littérature, qui présume l'existence d'une relation d'influence entre quatre facteurs (caractéristiques des auditeurs, le soutien de la haute direction, la qualité de la fonction audit interne, la relation auditeurs audités) et l'efficacité de l'audit interne.
    Keywords: IA effectiveness,Factors of effectiveness,Public sector,Audit interne,Efficacité d'AI,Facteurs d'efficacité,Théories d'efficacité d'AI,Secteur public
    Date: 2021
  2. By: Mona Barake (EU Tax - EU Tax Observatory); Theresa Neef (EU Tax - EU Tax Observatory); Paul-Emmanuel Chouc (EU Tax - EU Tax Observatory); Gabriel Zucman (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, EU Tax - EU Tax Observatory)
    Abstract: This study estimates how much tax revenue the European Union could collect by imposing a minimum tax on the profits of multinational companies. We compute the tax deficit of multinational firms, defined as the difference between what multinationals currently pay in taxes, and what they would pay if they were subject to a minimum tax rate in each country. We then consider three ways for EU countries to collect this tax deficit. First, we simulate an international agreement on a minimum tax of the type currently discussed by the OECD, favored by a number of European Union countries, and by the United States. In this scenario, each EU country would collect the tax deficit of its own multinationals. For instance, if the internationally agreed minimum tax rate is 25% and a German company has an effective tax rate of 10% on the profits it records in Singapore, then Germany would impose an additional tax of 15% on these profits to arrive at an effective rate of 25%. More generally, Germany would collect extra taxes so that its multinationals pay at least 25% in taxes on the profits they book in each country. Other nations would proceed similarly. We find that such a 25% minimum tax would increase corporate income tax revenues in the European Union by about €170 billion in 2021. This sum represents more than 50% of the amount of corporate tax revenue currently collected in the European Union and 12% of total EU health spending. The revenue potential of a coordinated minimum tax is thus large. However, revenues significantly depend on the commonly agreed minimum tax rate. With a 21% minimum rate, the European Union would collect about €100 billion in 2021. Moving from 21% to 15% would reduce the potential revenue by a factor of two to about €50 billion. Second, we simulate an incomplete international agreement in which only EU countries apply a minimum tax, while non-EU countries do not change their tax policies. In this scenario, each EU country would collect the tax deficit of its own multinationals (as in our first scenario), plus a portion of the tax deficit of multinationals incorporated outside of the European Union, based on the destination of sales. For instance, if a British company makes 20% of its sales in Germany, then Germany would collect 20% of the tax deficit of this company. We find that that in such a scenario, using a rate of 25% to compute the tax deficit of each multinational, the European Union would increase its corporate tax revenues about €200 billion. Out of this total, €170 billion would come from collecting the tax deficit of EU multinationals; an additional €30 billion would come from collecting a portion of the tax deficit of non-EU multinationals. For the European Union, there is thus a much higher revenue potential from increasing taxes on EU companies than from taxing non-EU companies. To improve the fairness of its tax system and generate new government revenues (e.g., to pay for the cost of Covid-19), it is essential that the European Union polices its own multinationals. Last, we estimate how much revenue each EU country could collect unilaterally, assuming all other countries keep their current tax policy unchanged. This corresponds to a "first-mover" scenario, in which one country alone decides to collect the tax deficit of multinational companies. This first mover would collect the full tax deficit of its own multinationals, plus a portion (proportional to the destination of sales) of the tax deficit of all foreign multinationals, based on a reference rate of 25%. We find that a first mover in the European Union would increase its corporate tax revenues by close to 70% relative to its current corporate tax collection. Although international coordination is always preferable, a unilateral move of a single EU member state (or a group of member states) would encourage other EU countries to also collect the tax deficit of multinationals—as not doing so would mean leaving tax revenues on the table for the first movers to grab. This could pave the way for an ambitious agreement on a high minimum tax, within the European Union and then globally. This analysis shows that unilateral action can play a transformative role and that refusing international coordination is not a sustainable solution, since other countries can always choose to collect the taxes that tax havens choose not to collect. Our estimates are based on a transparent methodology that combines newly available macroeconomic data on the location and effective tax rates of multinational profits. We illustrate and validate our approach by applying it to firm-level data publicly disclosed by all European banks and 16 large non-bank multinationals. We find that European banks would have to pay 41% more in taxes if they were subject to a 25% country-by-country minimum tax. This estimate is in line with our finding that EU multinationals as a whole (all sectors combined) would have to pay around 50% more in taxes, thus suggesting that this number is indeed the correct order of magnitude. Companies such as Shell, Iberdrola, and Allianz—who voluntarily disclose their country-by-country profits and taxes—would also have to pay 35%-50% more in taxes if they were subject to a 25% minimum tax. This report is supplemented by a pioneering interactive website, This new tool allows policy makers, journalists, members of civil society, and all citizens in each EU country to assess the revenue potential from minimum taxation on both domestic and foreign firms. Users can select various scenarios (e.g., international coordination or unilateral action), and a full range of minimum tax rates from 10% to 50%. All the data and computer code are available online, making our estimates fully reproducible. We plan to regularly update our findings, as improved and more comprehensive macroeconomic data sources become available, refined estimation techniques are designed, and more companies publicly disclose their country-by-country reports.
    Date: 2021–07
  3. By: Diller, Markus; Lorenz, Johannes; Schneider, Georg; Sureth, Caren
    Abstract: This study investigates how strategic tax transfer pricing of a multinational company (MNC) and two tax authorities in different countries affects production and tax avoidance decisions at the firm level and tax revenues at the country level. We employ a game-theoretical model to analyze the costs and benefits of two tax transfer pricing regimes (consistency vs. inconsistency) under asymmetric information. Though tax transfer pricing harmonization is considered a promising instrument to fight undesired tax avoidance, the implications are largely unclear. We find tax avoidance in equilibrium in both countries under inconsistency. Surprisingly, we identify conditions under which low-tax countries benefit from consistency while high-tax countries benefit from inconsistency. This explains how the strategic interaction of taxpayer and tax authorities under firm-level heterogeneity challenges the implementation of consistent regimes. Understanding the implications of (in)consistent transfer pricing rules is crucial when reforming transfer pricing regulations to fight tax avoidance and double taxation.
    Keywords: transfer pricing,transfer pricing inconsistency,tax avoidance,tax harmonization,strategic behavior,real effects
    JEL: H20 H26 C72 K34 F53
    Date: 2021
  4. By: Rishi R. Sharma; Joel Slemrod; Michael Stimmelmayr
    Abstract: We develop a positive model of multinational firm behavior and analyze a firm’s incentive to transfer an intellectual property (IP) right of uncertain value offshore ex ante, i.e. before its success or failure is realized. With an asymmetric treatment of losses in the home country, the multinational firm will transfer its IP to a foreign low-tax country to avoid potentially negative profits at home. In addition, similar incentives exist to transfer the IP to a jurisdiction where tax rates are comparable or even higher than at home if the foreign jurisdiction offers a more symmetric treatment of losses.
    Keywords: intellectual property, corporate taxation, loss-offset, tax avoidance
    JEL: H25 H26 D21 F23
    Date: 2021
  5. By: Farzana Afridi, (Economics and Planning Unit, Indian Statistical Institute, Delhi and IZA, Bonn); Sourav Bhattacharya, (Indian Institute of Management, Kolkata); Amrita Dhillon, (Department of Political Economy, Kings College, London, and CAGE, University of Warwick); Eilon Solan, (School of Mathematical Sciences, Tel Aviv University)
    Abstract: In developing countries with weak enforcement institutions, there is implicitly a large reliance on electoral incentives to reduce corruption. However electoral discipline works well only under some conditions. In this paper we study the effect of electoral competition on corruption when uncertainty in elections is high (or accountability is low), as in many developing countries . Our theory focuses on the case of high uncertainty and shows that in this case there is a U-shaped relationship between electoral competition and corruption. We illustrate the predictions of the model with village level data on audit detected irregularities and electoral competition from India.
    Keywords: Corruption, Electoral Competition, Uncertainty, Audit, Accountability JEL Classification: D72, D82, H75, O43, C72.
    Date: 2021
  6. By: Dominique Desbois (ECO-PUB - Economie Publique - INRA - Institut National de la Recherche Agronomique - AgroParisTech)
    Abstract: Le libéralisme contre le capitalisme Valérie Charolles Gallimard, Essay Folio n°667, 383 S. Diese überarbeitete und erweiterte Taschenbuchausgabe bietet dem Leser eine Reflexion, die vorschlägt, dem Ökonomismus, der unsere Gesellschaft beherrscht, zu entkommen. Dieser Ökonomismus nimmt die Form eines Zwanges an, der von ökonomischen Kräften ausgeübt wird, die uns zur Ohnmacht verurteilen. Zu diesem Zweck schlägt das Buch vor, die Grundlagen der Wirtschaft zu hinterfragen, zunächst in den Buchhaltungsprinzipien, die das Funktionieren der Unternehmen regeln, und stellt fest, dass das Humankapital in ihren Büchern nicht vorkommt. Diese Situation ist umso paradoxer, als die neue Wirtschaft zunehmend auf "Humankapital" basiert. In seinem Werk "The Wealth of Nations" setzt sich Adam Smith sehr kritisch mit Kapitaleinkommen auseinander. Für ihn muss das freie Spiel des Marktes eine gewisse Form der Gleichheit angesichts der vom Wettbewerb getroffenen Auswahl gewährleisten. Wie Adam Smith ist der Autor der Ansicht, dass der wirtschaftliche Reichtum aus der Arbeit und nicht aus dem Kapital kommt, denn Arbeit ist die theoretische Quelle allen Reichtums. Von der Beobachtung einer entwerteten Arbeit gehen wir zum Problem des Wertes der Arbeit über, bei dem die Arbeit nicht mehr nur als Last betrachtet wird, sondern gleichberechtigt mit dem Kapital in einer Weise behandelt würde, die den Grundlagen des Liberalismus besser entspricht.
    Abstract: Le libéralisme contre le capitalisme Valérie Charolles Gallimard, essay Folio n°667, 383 p. This revised and enlarged paperback edition provides readers with a reflection that aims to escape the economism that dominates our society. This economism takes the form of a constraint exerted by economic forces that condemn us to impotence. To this end, the book proposes to question the foundations of the economy first in the accounting principles that govern the functioning of companies, noting that human capital is absent from their books. This situation is all the more paradoxical as the new economy is increasingly based on "human capital". In his work "The Wealth of Nations", Adam Smith is very critical of income from capital. For him, the free play of the market must ensure a certain form of equality in the face of the selection made by competition. Like Adam Smith, the author considers that economic wealth comes from labour and not from capital, because labour is the theoretical source of all wealth. From the observation that labour is devalued, we move on to the problem of labour-value, where labour is no longer considered only as a burden but is treated on an equal footing with capital, in a way that is more consistent with the fundamentals of liberalism.
    Abstract: Le libéralisme contre le capitalisme Valérie Charolles Gallimard, essai Folio n°667, 383 p. Cette édition revue et augmentée dans un format poche met à disposition des lecteurs une réflexion qui se propose d'échapper à l'économisme qui domine notre société. Cet économisme se présente sous la forme d'une contrainte exercée par les forces économiques qui nous condamnent à l'impuissance. À cet effet, l'ouvrage se propose d'interroger les fondements de l'économie d'abord dans les principes comptables qui régissent le fonctionnement des entreprises, constatant que le capital humain est absent de leurs livres de comptes. Situation d'autant plus paradoxale que la nouvelle économie repose de plus en plus sur le « capital humain ». Dans son oeuvre « La richesse des nations », Adam Smith se montre très critique vis à vis des revenus tirés du capital. Pour lui, le libre jeu du marché doit assurer une certaine forme d'égalité devant la sélection opérée par la concurrence. À l'instar d'Adam Smith, l'auteure considère que la richesse économique provient du travail et non du capital car le travail est source théorique de toute richesse. Du constat d'un travail dévalorisé, on passe ainsi à la problématique de la valeur-travail où le travail n'est plus seulement considéré comme une charge mais serait traité sur un pied d'égalité avec le capital de façon plus cohérente avec les fondamentaux du libéralisme.
    Date: 2021–04–01
  7. By: Andreas Thiemann (European Commission - JRC)
    Abstract: This paper sheds light on the scarce empirical evidence on cryptocurrency users and use types. Based on the only available empirical estimate (shared by Chainalysis), this paper simulates the revenue potential from taxing Bitcoin capital gains in the EU. Total estimated Bitcoin capital gains in the EU amount to 12.7 billion EUR in 2020, including 3.6 billion EUR of realized gains. Applying national tax rules on capital gains from shares to those from Bitcoin yields a simulated tax revenue of about 850 million EUR in 2020. This paper is the first to empirically assess the tax revenue potential of capital gains from Bitcoin in the EU. While most of the empirical cryptocurrency literature is based on time-series data, this paper relies on dis-aggregated country-level data. The findings show that revenue from taxing cryptocurrencies is non-negligible and will be if the market of cryptocurrencies continues to grow.
    Keywords: Capital gains taxation, cryptocurrencies, Bitcoin.
    JEL: G19 G23 H24
    Date: 2021–08
  8. By: John Brondolo
    Abstract: This technical note and manual (TNM) addresses the following questions: (1) What are the main challenges in administering the value-added tax on imported digital services and the measures that countries have introduced to address the challenges?; (2) What are the main challenges in administering the value-added tax on low-value imported goods and the measures that countries have introduced to address the challenges? ;and (3) What are the key tasks in implementing the measures for improving the administration of the value-added tax on imported digital services and low-value imported goods?
    Date: 2021–05–21
  9. By: Ozili, Peterson Kitakogelu; Adamu, Ahmed
    Abstract: We examine whether countries that have high levels of financial inclusion have fewer non-performing loans and loan loss provisions in their banking sectors. The fixed effect panel regression methodology was used to analyse the effect of financial inclusion on bank non-performing loans and loan loss provisions. Using data from 48 countries, we find that greater formal account ownership is associated with high non-performing loans. Bank loan loss provisions are fewer in countries that have high levels of financial inclusion only when financial inclusion is achieved through the combined use of formal account ownership, bank branch supply and ATM supply. Also, non-performing loans are fewer in countries that experience economic boom and high levels of financial inclusion.
    Keywords: financial inclusion, non-performing loans, loan loss provisions, financial stability, bank stability, ATM, formal account ownership, credit risk, access to finance.
    JEL: G00 G20 G21 G23 G28 G29 O31
    Date: 2021–08

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