nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2023‒07‒10
twelve papers chosen by

  1. The Microfoundations of Audit Quality By Peters, Christian P. H.
  2. Impact of Local Corporate Income Taxes on the Effective Corporate Income Tax Rates: Excess Taxation and Tax Deductibility in Japan By Toshiyuki Uemura
  3. Отчитането на устойчивостта - липсващата част от пъзела на счетоводното образование By Atanasov, Atanas
  4. Theoretical and Practical Study on Value Added Tax at National and Community Level (First part) By Agatador Mihaela Popescu; Mariana Rodica Tirlea
  5. Firm Responses to an Interest Barrier: Empirical Evidence By Jarkko Harju; Ilpo Kauppinen; Olli Ropponen
  6. Fiscal Consequences of Corporate Tax Avoidance By Katarzyna Bilicka; Evgeniya Dubinina; Petr Janský; Katarzyna Anna Bilicka
  7. Financial Statements not Required By Minnis, Michael; Sutherland, Andrew; Vetter, Felix
  8. Pacioli’s Lens: Through a glass, darkly By Macve, Richard
  9. Bearing the burden – Implications of tax reporting institutions and image concerns on evasion and incidence By Kaisa Kotakorpi; Topi Miettinen; Satu Metsälampi
  10. A Targeted Golden Rule for Public Investments? By Sebastian Blesse; Florian Dorn; Max Lay
  11. Measuring the Cost of Open Source Software Innovation on GitHub By J Bayoán Santiago Calderón; Carol Robbins; Ledia Guci; Gizem Korkmaz; Brandon L. Kramer
  12. Changes to Bank Capital Ratios and their Drivers Prior and During COVID-19 Pandemic: Evidence from EU By Pavel Jankulár; Zdeněk Tůma

  1. By: Peters, Christian P. H. (Tilburg University, School of Economics and Management)
    Date: 2023
  2. By: Toshiyuki Uemura (School of Economics, Kwansei Gakuin University)
    Abstract: This study explores local corporate income taxes in Japan, which are considered unique from an international perspective. Few countries impose local corporate income taxes. Although corporate income tax rates have decreased worldwide, countries with local corporate income taxes may show less flexibility in corporate income tax reform than countries without, as effective corporate income tax rates based on statutory tax rates remain higher than those without local corporate income taxes. Japan's local corporate income tax system allows for excess taxation and deductibility of corporate enterprise taxes. Countries such as Japan, where local corporate income tax revenues account for a significant share of total tax revenues, may need to reform their local corporate income tax systems. Germany's 2008 business tax reform, which abolished deductibility and lowered the tax rate, provides a helpful reference. This study incorporates the permanent effect of deductibility into the forward-looking effective tax rates by Klemm (2008, 2012) and analyzes the impact of excessive taxation and effective corporate tax rates of reforms of the deductibility of enterprise taxes, following the German business tax reform. First, the excessive taxation of the corporate inhabitant tax rate and the enterprise tax rate impacts 0.9 to 1.1% when converted to the real interest rate. Second, abolishing the deductibility of enterprise taxes and reducing the tax rate improves financing neutrality, possibly reducing the tax rate by approximately 1%. Third, a reform that changes the timing of deductibility in the current period has less impact than abolishing deductibility. Future reforms must be implemented in Japan's local corporate income taxes while considering the current impact on effective corporate income tax rates.
    Keywords: local corporate income tax, excess taxation, tax deductibility
    JEL: H25 H32
    Date: 2023–06
  3. By: Atanasov, Atanas
    Abstract: В доклада се споделя виждането, че основният фокус на отчетността на предприятията трябва да бъде върху тяхната устойчивост – в широк смисъл – като финансовите й резултати са част от това, заедно с постигнатите резултати в управлението на екологични, социални и управленски (ESG) въпроси и те следва да намерят място в съвременното счетоводно образование. Целта на този доклад е да се извърши критичен анализ на съществуващите практики, свързани с включването на въпросите за нефинансовото (устойчиво) отчитане, в учебните планове на българските висши училища и на тази основа да се формулират конкретни изводи и препоръки с цел подобряване на нивото на подготовката на дипломираните студенти в контекста на съвременните бизнес реалности и предизвикателствата пред корпоративната отчетност. This report shares the view that the main focus of the corporate reporting should be on sustainability in a broad sense – with financial performance as part of this, along with environmental, social and governance (ESG) performance and these issues have to take place in the contemporary accounting education. The purpose of this paper is to carry out a critical analysis of the existing practices related to the inclusion of sustainable (non-financial) reporting issues in the accounting curricula of Bulgarian universities and, on this basis, to formulate specific conclusions and recommendations with the aim of improving the level of preparation of graduate students in the context of modern business realities and the challenges of contemporary corporate reporting.
    Keywords: accounting education, sustainability reporting, ESG
    JEL: M41
    Date: 2023
  4. By: Agatador Mihaela Popescu (Dimitrie Cantemir Christian University of Bucharest, Romania); Mariana Rodica Tirlea (Dimitrie Cantemir Christian University of Bucharest, Romania)
    Abstract: Value Added Tax qualifies as an indirect tax. Indirect taxes are applied in the sphere of the circulation of goods or the provision of services and are included in the sale price of goods and services. In terms of taxation, the first interventions of the European Community concerned indirect taxes, motivated by the raising of borders between European states, and implicitly the raising of customs duties. As a result, they led to the development of normative acts regarding the harmonization of national legislation with European requirements in the matter of indirect taxes. The study follows aspects of a theoretical and practical nature regarding the Value Added Tax. The results of the research allowed us to clarify the theoretical conceptual framework regarding the Value Added Tax, and at a practical level, the research of the legislative framework was carried out over an extended period of time 2002-2022, which allowed us to observe, at the national level, the legislative evolution and the changes since its establishment of this type of tax until now and to carry out a comparative analysis of the Value Added Tax practiced by our country and the Community member states.
    Keywords: Value Added Tax, taxation, tax, indirect tax, technical elements, tax base, standard rate, reduced rates, very reduced rates
    Date: 2022–10
  5. By: Jarkko Harju (Tampere University, Finnish Centre of Excellence in Tax Systems Research (FIT), VATT Institute for Economic Research and CESifo); Ilpo Kauppinen (VATT Institute for Economic Research and CESifo); Olli Ropponen (Etla Economic Research)
    Abstract: This paper studies the effects of an interest barrier (IB) that was introduced in Finland to restrict the profit-shifting opportunities of multinational enterprises (MNEs). We employ Orbis database on Finnish, Swedish and Danish MNEs and a difference-in-differences methodology, where Swedish and Danish MNEs serve as a control group. We find that Finnish MNEs responded to IB by decreasing their financial expenses. We also find that the most affected firms decreased their debt levels due to the reform. Our results suggest that the financial expense response is followed by a change in the use of transfer pricing as a method to shift profits between tax jurisdictions. We do not find evidence of total output changes among treated firms, suggesting that the IB did not affect the real activity of MNEs.
    Keywords: Corporate income tax, Multinational firms, Capital structure, Profit shifting, Interest barrier
    JEL: H25 H26 G32
    Date: 2023–02
  6. By: Katarzyna Bilicka; Evgeniya Dubinina; Petr Janský; Katarzyna Anna Bilicka
    Abstract: We study the consequences of multinational tax avoidance on the structure of government tax revenues. To motivate our analysis, we show that countries with high revenue losses due to profit shifting have lower corporate tax revenues and rates and higher indirect tax revenues and rates. To establish causality, we use German municipal data and analyse how changes in municipal trade tax rates levied on corporate profits affect local tax revenue structure. Following a trade tax rate increase, we find that municipalities with high exposure to aggressive multinationals experience a significant decline in trade tax revenue levels and shares.
    Keywords: corporate tax avoidance, profit shifting, multinational corporations, government tax revenue structure
    JEL: E62 H26 H71
    Date: 2023
  7. By: Minnis, Michael; Sutherland, Andrew; Vetter, Felix
    Abstract: Using a dataset covering 3 million commercial borrower financial statements, we document a substantial, nearly monotonic decline in banks’ use of attested financial statements (AFS) in lending over the past two decades. Two market forces help explain this trend. First, technological advances provide lenders with access to a growing array of borrower information sources that can substitute for AFS. Second, banks are increasingly competing with nonbank lenders that rely less on AFS in screening and monitoring. Our results illustrate a novel implication of positive accounting theory: technology adoption and changes in credit market structure can render AFS less efficient for screening and monitoring, and reduce lenders’ demand for them.
    Keywords: banks, lending standards, financial statements, auditing, SME lending, nonbank lending, fintech
    JEL: M40 M41 M42
    Date: 2023–04–01
  8. By: Macve, Richard
    Abstract: It has long been argued that double-entry bookkeeping (‘DEB’) was important for enabling capitalism’s development in the West and heralded the beginning of ‘modern accounting’. However, these claims remain contested so it is important to understand the history of DEB’s emergence about 700 years ago and its underlying rationale. Sangster (2018a) [Pacioli's Lens: God, Humanism, Euclid, and the Rhetoric of Double Entry. The Accounting Review, 93(2): 299-314] argues that, in the first printed manual on DEB in 1494, Pacioli presented a novel ‘axiomatic’ approach to explaining DEB that requires a corresponding ‘paradigmatic shift’ in our appreciation of his contribution. This paper challenges Sangster’s interpretation of Pacioli’s mathematical contribution and calls for deeper understanding of the historical development of DEB in the West by comparison with accounting developments in the East.
    Keywords: Pacioli; double-entry bookkeeping (DEB); algebraic axioms; comparative international accounting history
    JEL: B11 C00 M40 P52
    Date: 2021–12–17
  9. By: Kaisa Kotakorpi (Finnish Centre of Excellence in Tax Systems Research (FIT), Tampere University and VATT Institute for Economic Research; Hanken School of Economics and Helsinki GSE); Topi Miettinen (Hanken School of Economics and Helsinki GSE); Satu Metsälampi (University of Turku)
    Abstract: We investigate effects of tax reporting institutions on evasion and incidence using an experimental double auction market setting. We find that 28% of the sellers are truthful when only sellers report, but that 88% and 64% of them are truthful under costless and costly third-party reporting by buyers, respectively. Reporting behavior therefore responds to the intensity of deterrence. However, we find that prices do not fully reflect the lower taxes of the evaders. Thus, when sellers can unilaterally evade taxes, tax incidence deviates from the prediction of the standard model, and there is deadweight loss even if tax revenue is low. Pricing, incidence, and reporting patterns in all treatments can be explained by a model of lying costs with image concerns that give rise to a motivation to appear honest.
    Keywords: Tax Evasion, Tax Incidence, Third-Party Reporting, Double Auction, Social image, Experiment
    JEL: H21 H22 H26 D40 D44 D91
    Date: 2022–11
  10. By: Sebastian Blesse; Florian Dorn; Max Lay
    Abstract: A Comparative Analysis of Possible Accounting Methods in the Context of the Review of Stability and Growth Pact The EU faces the challenge to combine large and sustained investments to promote the transition towards a green, digital, and competitive Europe while maintaining fiscal sustainability. Based on a comprehensive literature review on the effects of fiscal rules and investment clauses on public finances, this in-depth analysis provides some guidance how higher public investments can be achieved by a targeted golden rule without harming fiscal sustainability in the EU fiscal framework. The study also discusses the role of investments in the current proposals of the European Commission on the reform of the EU Economic Governance.
    Date: 2023
  11. By: J Bayoán Santiago Calderón; Carol Robbins; Ledia Guci; Gizem Korkmaz; Brandon L. Kramer (Bureau of Economic Analysis)
    Abstract: Open source software (OSS) is software that anyone can study, inspect, modify, and distribute freely under very limited restrictions, generally attribution. While OSS is vital to virtually all aspects of modern society, there is no standard methodology to satisfactorily measure the scope and impact of these intangible assets. Today, GitHub is the world’s largest forge with over 80 million users and 118 million public repositories. This study presents a framework based on GitHub’s administrative data to discover, profle, and measure the development of OSS. The data include over 7.75 million original, nondeprecated repositories with a machine detectable OSI-approved license. For each repository, we collect metadata such as commits, license, and information about contributors. Adopting a cost estimation model from software engineering and national accounting methods for measurement of software, we develop a methodology to generate estimates of investment in OSS that are consistent with measures of software investment in the U.S. national accounts. Our current estimates show that the U.S. investment in OSS in 2019 was $36.2 billion.
    JEL: C82 E22 H42 L17 O3 O51
    Date: 2022–07
  12. By: Pavel Jankulár; Zdeněk Tůma
    Abstract: We contribute to literature on banks´ strategies to increasing capital requirements in the period of 2017-2021. We analyze a sample of 85 European banks and differentiate between subgroups according to bank's size, capitalization and riskiness. We examine their responses to higher capital requirements following the issuance of finalized Basel III reforms and increased regulatory and supervisory scrutiny after the COVID-19 outbreak. We found evidence that banks´ adjustments in the direction of higher capital ratio were more pronounced and faster in the COVID-19 period, and that they depended on banks´ specific characteristics and positions. Identified variances between banks and periods resulted mainly from different treatment of risk on banks' books. In particular, higher capitalization and lower risk profile enabled banks to take on the risk regardless of period, while banks with increased risk rather limited their balance sheets to manage their capital ratios.
    Keywords: capital ratio, Basel capital requirements, COVID-19 pandemic, global financial crisis
    JEL: C33 G21 G28
    Date: 2023–05–02

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.