nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2021‒11‒22
nine papers chosen by

  1. Ways of taxing wealth: alternatives and interactions By Summers, Andrew
  2. Tax evasion, behavioral microsimulation models and flat-rate tax reforms. Analysis for Italy By Andrea Albarea; Michele Bernasconi; Anna Marenzi; Dino Rizzi
  3. How Does Private Firm Disclosure Affect Demand for Public Firm Equity? Evidence from the Global Equity Market By Kim, Jinhwan; Olbert, Marcel
  4. Who should pay a wealth tax? Some design issues By Chamberlain, Emma
  5. The taxation of capital gains : principles, practice, and directions for reform By Advani, Arun
  6. An assessment of presumptive tax in Uganda: Evaluating the 2020 reform and four alternative reform scenarios using UGAMOD, a tax-benefit microsimulation model for Uganda By Ronald Waiswa; Jesse Lastunen; Gemma Wright; Michael Noble; Joseph Okello Ayo; Milly Isingoma Nalukwago; Tina Kaidu Barugahara; Susan Kavuma; Isaac Arinaitwe; Martin Mwesigye; Wilson Asiimwe; Pia Rattenhuber
  7. Taxing the Residual Profit of Multinational Enterprises: A Critique of Formulaic Apportionment and a Proposal By Wolfram F. Richter
  8. Brazil: Tax Expenditure Rationalization Within Broader Tax Reform By Maria Delgado Coelho
  9. Tax compliance in post-transition: You and your friends matter, not the government By Natalia Levenko; Karsten Staehr

  1. By: Summers, Andrew
    Abstract: In this paper, I examine the role of a wealth tax in the context of the UK's existing taxes on wealth. First, I discuss several ways in which the UK could be said to tax wealth already, and I set out two possible directions for reforming these taxes, highlighting policies that are merited under either approach. Second, I consider whether and under what circumstances a broad-based tax on the ownership of wealth – a ‘wealth tax’ – could be justified instead of or in addition to these reforms. Third, I address how a wealth tax should interact with other taxes, focusing on concerns regarding ‘double taxation’ and (conversely) proposals for an alternative minimum tax based on wealth. I conclude that there is a large degree of consensus amongst existing proposals to reform our current taxes on wealth, and that most of these reforms would be required whether or not a wealth tax is introduced as well.
    Keywords: capital gains tax; comprehensive income tax; income tax; inheritance tax; Mirrlees review; wealth tax; ES/L011719/1; International Inequalities Institute AFSEE COVID‐19 fund; Wiley deal
    JEL: H20 H24 H26 K34
    Date: 2021–10–25
  2. By: Andrea Albarea (Department of Economics, University Of Venice CÃ Foscari); Michele Bernasconi (Department of Economics, University Of Venice CÃ Foscari); Anna Marenzi (Department of Economics, University Of Venice CÃ Foscari); Dino Rizzi (Department of Economics, University Of Venice CÃ Foscari)
    Abstract: It is sometimes argued that a flat-rate tax reform can reduce tax noncompliance. The argument is, however, inconsistent with the so-called Yitzhaki’ s puzzle of the classical expected utility (EU) model. The latter predicts an increase, rather than a reduction, in tax evasion following a cut in the tax rates resulting from a flat-rate reform. We study the impact of a flat-rate tax in a microsimulation tax-benefit model of Italy which allows us to analyse various hypotheses of tax evasion behavior. In addition to the EU model, we analyse expected utility with rank dependent probabilities (EURDP) and the model of reference dependent (RD) preference, the most favourable to overturn Yitzhaki’ s puzzle. Our simulations show that a flat-rate tax would barely reduce overall evasion in Italy in all models considered. Redistributive effects are in all cases large.
    Keywords: Fiscal reforms, tax evasion, reference dependent preferences
    JEL: H20 H26 H30
    Date: 2021
  3. By: Kim, Jinhwan (Stanford Graduate School of Business); Olbert, Marcel (London Business School)
    Abstract: We investigate the relationship between private firms’ disclosures and the demand for the equity of their publicly traded peers. Using data on the global movement of public equity, we find that a one standard deviation increase in private firm disclosure transparency – proxied by the number of disclosed private firms’ financial statement line items — reduces global investors’ demand for public equity by 13% to 16% or by $206 million to $253 million in dollar terms. These findings are consistent with private firm disclosures generating negative pecuniary externalities – global investors reallocate their capital away from public firms to more transparent private firms — and less consistent with these disclosures creating positive information externalities that would benefit public firms. Consistent with this interpretation, we find that the reduction in demand for public equity is offset by a comparable increase in capital allocation to more transparent private firms. Using staggered openings of the Bureau van Dijk database offices in each investee country as a plausibly exogenous shock to private firm disclosures, we conclude that the negative relationship between private firm disclosures and public equity demand is likely causal.
    JEL: F21 F30 G15 G30 M16 M40 M41
    Date: 2021–04
  4. By: Chamberlain, Emma
    Abstract: Any wealth tax design needs to resolve the question of who should pay it it How wide should the net be cast? Setting high or low exempt thresholds affects avoidance behaviour and may influence whether one should tax by reference to the household (and if so how that should be defined) or simply on each individual who owns wealth over a certain threshold. Typically, wealth taxes in other countries have not been imposed on non-residents except in relation to real property but questions remain over whether any exempt period should be given to new arrivals, not least for administrative convenience. A one-off wealth tax would require a different design in a number of respects from an annual wealth tax. For example, a one off tax t would need to be designed to catch those who have recently left the UK and contain modifications for recent arrivals. Trusts, foundations and similar vehicles pose particular problems in the design of a wealth tax and the author suggests some possible solutions and connecting factors that could be considered.
    Keywords: avoidance; one-off tax; tax design; wealth tax; household; trusts; ES/LO11719/1; Wiley deal
    JEL: D31 H24
    Date: 2021–10–25
  5. By: Advani, Arun (University of Warwick, CAGE Research Centre, the Institute for Fiscal Studies, and the LSE International Inequalities Institute)
    Abstract: Capital gains are particularly complex to tax given their infrequency, the different ways in which they are generated, and worries about harming productivity. There are theoretical arguments in support of everything from zero rates to high rates of tax on capital. In this paper, I first discuss the impact of capital gains on inequality, which often motivates discussions about how gains should be taxed. I then set out the principles that determine how gains should be taxed, in particular how the tax rate should relate to income tax rates. I propose that capital gains tax rates be equalized with income tax rates, subject to provisions to allow gains to be ‘smoothed’ over time and to remove inflation from the tax base. I highlight key transitional issues in moving to such a tax structure. Finally, I discuss the specific lessons for Canada.
    Date: 2021
  6. By: Ronald Waiswa; Jesse Lastunen; Gemma Wright; Michael Noble; Joseph Okello Ayo; Milly Isingoma Nalukwago; Tina Kaidu Barugahara; Susan Kavuma; Isaac Arinaitwe; Martin Mwesigye; Wilson Asiimwe; Pia Rattenhuber
    Abstract: Presumptive tax, a final tax on business income, was introduced in Uganda in 1997. The latest reform to the regime in July 2020 sought to make the system more progressive, simpler, and fairer to small firms. In this work, we evaluate the reform, focusing on its revenue implications based on simulations using UGAMOD, a tax-benefit microsimulation model for Uganda. Our findings suggest that, assuming full compliance, the reform reduces tax revenue potential by between 48-72 per cent from the previous rules.
    Keywords: presumptive tax, Tax administration, Small business, Tax compliance, Impact evaluation, Microsimulation modelling
    Date: 2021
  7. By: Wolfram F. Richter
    Abstract: According to plans put forward by the OECD/G20 Inclusive Framework on BEPS, a share of residual profit earned by eligible MNEs is to be taxed by market jurisdictions. For this purpose, revenue-based formulaic apportionment of residual profit is proposed. This note argues against the use of a rule requiring the multilateral assessment of MNEs’ worldwide profit and recommends an alternative method of sharing taxing rights with market jurisdictions. The proposed method relies on unilateral profit splitting and is suggested by the application of Shapley value theory to the fair and equitable division of taxing rights between cooperating jurisdictions.
    Date: 2021
  8. By: Maria Delgado Coelho
    Abstract: The excessive complexity and burden of the Brazilian tax system, riddled by cumulative indirect taxes and heavy payroll contributions, have led to an accumulation of fiscal incentives aimed at reducing its burden on taxpayers and productive activities. Federal and subnational tax expenditures currently stand at over 5 percent of GDP. Rationalizing them can only be comprehensively feasible in the context of a broader sequenced tax reform, and could reduce resource misallocation and income inequality, as well as provide new revenues.
    Date: 2021–09–24
  9. By: Natalia Levenko; Karsten Staehr
    Abstract: This paper contributes to the literature that seeks to assess the importance of various theories on tax evasion by individuals. The various theories can be distinguished in detail using a very fine-grained survey of Estonian residents that was collected in three rounds from 2018 to 2020. Principal component analysis shows that the survey replies are mutually consistent and form distinct clusters that match key theories on tax evasion. Logit estimations of tax compliance use the principal components and various control variables as covariates. Theories of individual rational choice do not gain support. Factors associated with personal norms and with social norms and customs are important for tax compliance. Importantly, theories of reciprocity that depict a positive relation between approval of the government and tax compliance receive no support, possibly reflecting the wide spread of views on the role of government in post-transition Estonia. Sample splits reveal that the results apply broadly across various subsets of taxpayers. The results of the principal component regressions are corroborated by logit estimations where the survey variables enter individually
    Keywords: tax evasion, monetary and non-monetary motives, auditing, behavioural choice, norms and customs, reciprocity
    JEL: H26 H83
    Date: 2021–11–10

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