nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2023‒02‒13
ten papers chosen by

  1. Central Bank Balance Sheet Expansion in a Dollarized Economy: The Case of Ecuador By Julien Reynaud; Juan-Pablo Erraez
  2. PRÉSENTATION DE LA REVUE DES LIVRES By Sébastien Rocher; Olivier Vidal
  3. Estimating Income in a Tax Compliance Game. A Bayesian Persuasion Approach By Raphaela Hennigs
  4. Global Evidence on Profit Shifting Within Firms and Across Time By Fotis Delis; Manthos D. Delis; Luc Laeven; Steven Ongena
  5. What Do We Know About Taxpayer Responses to Tax Changes? By Carina Neisser
  6. Coming Clean on Your Taxes By Ruud A. de Mooij; Sebastian Beer
  7. Labor Taxation in the Western Balkan: Looking Back and Forward By Mr. Alain Jousten; Mario Mansour; Irena Jankulov Suljagic; Charles Vellutini
  8. Equity and Efficiency Effects of Land Value Taxation By Gregor Schwerhoff; Ottmar Edenhofer; Marc Fleurbaey
  9. Improving Sovereign Financing Conditions Through Data Transparency By Mr. Jesus R Gonzalez-Garcia
  10. Supporting Sustainable Financing and Access to Finance in Armenia By Kiichi Tokuoka; Maria Atamanchuk

  1. By: Julien Reynaud; Juan-Pablo Erraez
    Abstract: A textbook argument in favor of adopting another country’s legal tender is that it imposes strong constraints on money creation and therefore fiscal dominance. In Ecuador, an officially dollarized economy since January 2000, a series of accounting practices and subsequent changes in legislations approved over the period 2009-2014 allowed an expansion of the Central Bank of Ecuador’s (CBE) balance sheet to finance the central government. At its peak, central bank financing of the government represented 10 percent of GDP. This resulted in large liabilities to the CBE that translated into low reserve coverage, putting the public and private financial systems and ultimately the dollarization regime at risk. In this paper, we first present the legal and accounting processes behind the expansion of the CBE's balance sheet and some stylized facts. In the second section, we establish a stress test-like methodology to show how the expansion of the CBE’s balance sheet induced strong pressures on CBE’s liquidity. Ultimately, such liquidity stress at the CBE translated into high cash inflows needs, i.e. external debt, for the central government.
    Keywords: Central bank; balance sheet expansion; fiscal dominance; central bank financing; financing of the government; accounting practice; liquidity ration; CBE balance sheet; CBE liability; International reserves; State-owned banks; Financial statements; Bank deposits; Public sector
    Date: 2022–12–02
  2. By: Sébastien Rocher (CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine); Olivier Vidal (LIRSA - Laboratoire interdisciplinaire de recherche en sciences de l'action - CNAM - Conservatoire National des Arts et Métiers [CNAM] - HESAM - HESAM Université - Communauté d'universités et d'établissements Hautes écoles Sorbonne Arts et métiers université)
    Abstract: The book review is a new section of ACCRA, whose ambition is to talk about books likely to interest teachers, researchers and practitioners in accounting, control and auditing, in the continuity of the editorial policy of the journal.
    Abstract: La revue des livres est une nouvelle rubrique de la revue ACCRA, dont l'ambition est de parler d'ouvrages susceptibles d'intéresser les enseignants, les chercheurs et les praticiens en comptabilité, contrôle et audit, dans la continuité de la politique éditoriale de la revue.
    Date: 2022–05
  3. By: Raphaela Hennigs
    Abstract: This paper studies the tax authority’s problem of how to estimate a tax payer’s income in a tax compliance game. The tax authority’s choice of how to estimate income is modelled using the Bayesian persuasion framework and assuming that income can be estimated arbitrarily precisely. I show that the tax authority can use income estimates as a commitment device: ex-post, the tax authority has an incentive to audit a tax payer if his income is estimated to be high. This allows the tax authority to increase tax compliance by strategically overestimating low income. If the probability with which low income is falsely estimated to be high is strictly positive, the tax authority audits a low income tax payer with a strictly positive probability. Anticipating to be audited with a sufficiently high probability, the tax payer prefers to report low and high income to avoid being audited and fined.
    Keywords: tax audits, tax compliance, information design, Bayesian persuasion
    JEL: D82 D83 H26
    Date: 2022–11
  4. By: Fotis Delis (European Commission, Joint Research Centre); Manthos D. Delis (Audencia Business School); Luc Laeven (European Central Bank (ECB); Centre for Economic Policy Research (CEPR)); Steven Ongena (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR))
    Abstract: We provide the first global estimates of profit shifting at the subsidiary-year level. Employing nonparametric estimation techniques within a mainstay model of profit shifting, we examine the subsidiary-year responses of earnings to the composite tax indicator faced by all subsidiaries of a multinational firm. Our panel includes 26, 593 subsidiaries across 95 countries for the period 2009 2017. We extensively validate our results against aggregate estimates of previous studies and evidence from specific cases. We find that profit shifting decreased over this period in advanced economies but increased in other parts of the world where taxation policies are less stringent on average, consistent with tax arbitrage strategies. We also examine correlates of profit shifting, identifying that a key determinant is the subsidiaries’ ratio of intangible assets, and this channel is stronger in countries with weaker institutions. Both our new database and correlates open important avenues to analyze the sources and effects of profit shifting.
    Keywords: Profit shifting, multinational enterprises, nonparametric estimation, intangible assets, institutional quality, global sample
    JEL: F23 H25 H26 H32 M41
    Date: 2022–12
  5. By: Carina Neisser (University of Cologne)
    Abstract: The classical trade-off between equity and efficiency is central to income tax policy. On the one hand, higher taxes imply more resources to redistribute; but on the other hand, they might negatively affect incentives to work and the reporting of income itself. The design of tax and transfer policies, therefore, requires estimating the magnitude of behavioural responses to tax rate changes. Roughly speaking, the larger the responses to taxation, the smaller optimal tax rates should be.
    Date: 2021–08
  6. By: Ruud A. de Mooij; Sebastian Beer
    Abstract: This paper develops a simple model to explore whether a higher detection probability for offshore tax evaders—e.g. because of improved exchange of information between countries and/or due to digitalization of tax administrations—renders it optimal for governments to introduce a voluntary disclosure program (VDP) and, if so, under what terms. We find that if the VDP is unanticipated, it is likely to be optimal for a revenue-maximizing government to introduce a VDP with relatively generous terms, i.e. a low or even negative penalty. When anticipated, however, the VDP is neither incentive compatible nor optimal, as it induces otherwise compliant taxpayers to evade tax. A VDP can then only be beneficial if tax evasion induces an external social cost beyond the direct revenue foregone, e.g., due to adverse effects on overall tax morale. In contrast to the common view that VDPs should come along with additional enforcement effort, we find that governments should relax enforcement if the VDP itself provides more powerful incentives to come clean.
    Keywords: Tax evasion; Voluntary disclosure program; Tax amnesty
    Date: 2023–01–13
  7. By: Mr. Alain Jousten; Mario Mansour; Irena Jankulov Suljagic; Charles Vellutini
    Abstract: This paper examines how labor taxation (personal income taxes and social security contributions) in the Western Balkan contributes to labor market outcomes such as high informality and a significant gender gap in participation rates. We find that limited progressivity combined with high tax wedge on low incomes poses a major twin equity-efficiency challenge in the region, resulting in low redistributive capacity and inadequate incentives to enter the job market. Policy implications are discussed with a view to alleviating the excessively high tax wedges on low incomes, while improving progressivity of income taxation.
    Keywords: Western Balkan; labor taxation; labor tax wedge; personal income tax; corporate income tax; social security contributions; income taxation; SSC reduction; employer SSCs; Labor taxes; Tax wedge; Wages; Labor markets; Europe
    Date: 2022–12–02
  8. By: Gregor Schwerhoff; Ottmar Edenhofer; Marc Fleurbaey
    Abstract: It is a well-known result in economics that land value taxation is efficient since it does not distort the supply of the tax base. Considering only efficiency, land value should thus be fully taxed. Using optimal taxation theory with heterogeneous households, we show that it may be optimal not to tax land value fully for distributional reasons. The decisive variable is the covariance of land value held by households and their social welfare weight. Empirical data from the US and France, however, indicates that ownership of land value (in absolute terms) is negatively correlated to the social welfare weight. Middle income households would pay relatively more land value taxes than high income households, but less in absolute terms. With reasonable revenue recycling, land value taxation would thus reduce the net tax burden of low and middle income earners, because they would benefit more from the recycling than they pay in additional taxes.
    Keywords: land value taxation; inequality; optimal taxation; net tax burden; tax land value; income earner; land rent tax; Land tax; Income; Labor taxes; Housing; Labor supply
    Date: 2022–12–16
  9. By: Mr. Jesus R Gonzalez-Garcia
    Abstract: Does it pay off to be transparent and, if so, can the benefits of transparency be measured? This paper provides an affirmative answer to both questions, supported by novel evidence on the link between transparency through dissemination of economic data and sovereign bond spreads. It explores changes in sovereign financing conditions when countries join the IMF Data Standards Initiatives—a multilateral framework that promotes data transparency as a global public good. The results from event studies and local projection models show a significant decrease in spreads following the adoption of the standards. In addition, countries with relatively weaker governance benefit the most from signaling their effort toward strengthening transparency.
    Keywords: Data transparency; IMF Data Standards Inititatives; sovereign borrowing; EMBIG spreads; event studies; local projection methods; governance.; IMF Data Standards Initiatives; data dissemination standard; GDDS country; Data dissemination; Special Data Dissemination Standard (SDDS); Financial statistics; Global
    Date: 2022–11–18
  10. By: Kiichi Tokuoka; Maria Atamanchuk
    Abstract: In Armenia, both external and domestic financing face challenges. Armenia’s share of inward foreign direct investment (FDI) in private external financing has declined significantly over the past decade. Access to domestic finance in Armenia is also moderate and masks important disparities. Against this background, this paper analyses the determinants of inward FDI and examines the impediments to increasing access to domestic finance. The paper confirms empirically that governance-related structural factors have a significant impact on inward FDI. Similar structural factors, informality and poor accounting practices are reported among major challenges for increasing access to finance for firms in Armenia. This paper finds that to improve financing in Armenia include: implementing structural reforms to improve the business environment, maintaining prudent macroeconomic policies, strengthening financial reporting, and improving financial inclusion through reduced informality in the economy.
    Keywords: Inward FDI; access to finance; financial inclusion
    Date: 2023–01–13

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