nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2023‒04‒10
four papers chosen by

  1. Coming Clean on Your Taxes By Sebastian Beer; Ruud de Mooij; Ruud A. De Mooij
  2. Does capital bear the burden of local corporate taxes? Evidence from Germany By Aria Ardalan; Sebastian G. Kessing; Salmai Qari; Malte Zoubek
  3. The importance of escape clauses. Firm response to thin capitalization rules By Martin Eckhoff Andresen; Lars Thorvaldsen
  4. The Effects of the Tax Cuts and Jobs Act on the Tax-Competitiveness of Multinational Corporations By Michael Overesch; Leon G. A. Reichert; Georg Wamser

  1. By: Sebastian Beer; Ruud de Mooij; Ruud A. De Mooij
    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
    JEL: H26
    Date: 2023
  2. By: Aria Ardalan; Sebastian G. Kessing; Salmai Qari; Malte Zoubek
    Keywords: Otax incidence, corporate tax, event study
    JEL: H22 H25
    Date: 2023
  3. By: Martin Eckhoff Andresen (Statistics Norway); Lars Thorvaldsen
    Abstract: Escape clauses, where small firms are exempt from particular tax rules, is a crucial feature of a number of corporate tax schemes, but creates incentives to avoid taxation by manipulating the measures that determine inclusion. We evaluate the impact of thin capitalization rules, which commonly feature such escape clauses, by exploiting the introduction of these rules in Norway in 2014. Combining difference-indifferences, regression discontinuity and bunching estimates, we show that what appears to be a strong response in the capital structure among exposed firms primarily reflect within-group reallocation of debt to avoid exposure to the rules through escape clauses. We observe sharp bunching among both new and existing subsidiaries at both thresholds for rule inclusion, and find that internal corporate group debt is offloaded to these bunching subsidiaries in order to avoid additional tax costs. As a result, significant and large effects on firm-level capital structure in response to the thin capitalization rules is driven by reshuffling of capital within corporate groups with little real effects. Re-estimating the difference-indifference specification at the corporate group level confirms this finding, questioning the extent to which thin capitalization rules have the intended effect due to the presence of escape clauses.
    Keywords: Thin capitalization rules; capital structure; escape clauses; difference-in-differences; bunching
    JEL: H25 H26 G30
    Date: 2023–02
  4. By: Michael Overesch; Leon G. A. Reichert; Georg Wamser
    Abstract: We exploit the 2017 US tax reform to learn about the tax-competitiveness of US multinational corporations (MNCs) relative to their international peers. Matching on the propensity score, we compare pairs of similar US and European firms listed on the S&P500 or StoxxEurope600 in a difference-in-differences setting. Our results suggest significantly lower effective tax rates of US MNCs compared to their European competitors after the US tax reform. Additional tests show (i) that US MNCs have gained substantially in what we call tax-competitiveness, (ii) that the reform effect is more pronounced for MNCs with a high share of domestic activity, and (iii) that the tax reform did not change the international tax-planning behavior of US MNCs. We provide evidence that US MNCs already successfully engaged in international tax planning prior to the reform, and this behavior is unchanged after the tax reform.
    Keywords: effective tax rate, tax reform, tax-competitiveness, tax avoidance, pair matching, difference-in-differences analysis, profit shifting
    JEL: H25 H26 K34
    Date: 2023

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