nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2023‒08‒28
four papers chosen by

  1. Guatemala: Technical Assistance Report-Fiscal Transparency Evaluation By International Monetary Fund
  2. Quantitative easing, accounting and prudential frameworks, and bank lending By Orame, Andrea; Ramcharan, Rodney; Robatto, Roberto
  3. Hidden Havens: State and Local Governments as Tax Havens? By David R. Agrawal
  4. Behavioural Responses to Unfair Institutions: Experimental Evidence on Rule Compliance, Norm Polarisation, and Trust By Columbus, Simon; Feld, Lars P.; Kasper, Matthias; Rablen, Matthew D.

  1. By: International Monetary Fund
    Abstract: [This report is only available in Spanish] This report provides an updated assessment of fiscal transparency practices in Guatemala, aligning with the Fiscal Transparency Code (FTC) established by the International Monetary Fund (IMF). In 2016, Guatemala underwent an evaluation, which revealed that it had 4 practices rated as advanced, 4 as good, 17 as basic, and 10 practices fell below the basic level, with the practice concerning public-private partnerships not being rated. In the current evaluation, Guatemala demonstrates significant progress in fiscal transparency. The number of practices rated as basic or below has decreased to 17, while practices rated as good and advanced have increased to 19. Comparing with other Latin American countries and emerging market economies that have undergone the same evaluation, Guatemala's scores are similar. Presently, Guatemala has 7 practices at the advanced level, 12 at the good level, 11 at the basic level, and does not meet the minimum requirements of the CTF in 6 practices. The strongest areas of fiscal transparency practices lie in Pillar I, "Fiscal Reporting, " and Pillar III, "Fiscal Risks." However, in Pillar II, "Fiscal Budgets and Forecasts, " the scores are comparatively lower.
    Date: 2023–08–04
  2. By: Orame, Andrea; Ramcharan, Rodney; Robatto, Roberto
    Abstract: We study whether regulation that relies on historical cost accounting (HCA) rather than mark-to-market accounting (MMA) to insulate banks’ net worth from financial market volatility affects the transmission of quantitative easing (QE) through the bank lending channel. Using detailed supervisory data from Italian banks and taking advantage of a change in accounting rules, we find that HCA makes banks significantly less responsive to QE than MMA. Hence, while HCA can insulate banks’ balance sheets during periods of distress, it also weakens the effectiveness of unconventional monetary policy in reducing firms’ credit constraints through the bank lending channel. JEL Classification: G28, E52, M48
    Keywords: bank lending channel, historical cost accounting, regulatory capital, sovereign default premia, unconventional monetary policy
    Date: 2023–08
  3. By: David R. Agrawal
    Abstract: An international tax haven is usually a low-tax jurisdiction that seeks to attract investment by foreign investors. But, there are many state and local jurisdictions within federal systems that set zero tax rates on personal or corporate income, consumption, property, and wealth in an effort to attract activity from other high-tax jurisdictions. I discuss whether subnational tax havens are distinct from intense tax competition. I conclude that in a federal system, the economic implications of the two may be similar, but the policy responses differ subtly. A survey of the empirical evidence on the effect of zero or very low tax rates indicates that the lowest tax jurisdiction may disproportionately benefit from non-real base shifting, but real and avoidance responses also arise in response to smaller tax differentials between non-havens. Turning to the corporate income tax, I discuss how legal rules such as formula apportionment, economic nexus, and incorporation rules influence tax competition and the avoidance behaviors of multistate companies.
    Keywords: tax haven, tax competition, state and local public finance, regulatory competition, corporate charters
    JEL: H71 H73 H77 K22 K34 R51
    Date: 2023
  4. By: Columbus, Simon (University of Copenhagen); Feld, Lars P. (University of Freiburg); Kasper, Matthias (Walter Eucken Institute, Freiburg); Rablen, Matthew D. (University of Sheffield)
    Abstract: This study investigates the effects of unfair enforcement of institutional rules on public good contributions, personal and social norms, and trust. In a preregistered online experiment (n = 1, 038), we find that biased institutions reduce rule compliance compared to fair institutions. However, rule enforcement – fair and unfair – reduces norm polarisation compared to no enforcement. We also find that social heterogeneity lowers average trust and induces ingroup favouritism in trust. Finally, we find consistent evidence of peer effects: higher levels of peer compliance raise future compliance and spillover positively into norms and trust. Our study contributes to the literature on behavioural responses to institutional design and strengthens the case for unbiased rule enforcement.
    Keywords: public goods, compliance, social norms, trust, audits, biased rule enforcement, polarisation
    JEL: H41 C72 C91 C92
    Date: 2023–07

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