nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2023‒09‒18
two papers chosen by

  1. Fiscal Policy and the Government Balance Sheet in China By Mr. Waikei R Lam; Ms. Marialuz Moreno Badia
  2. International Tax Spillovers and Tangible Investment, with Implications for the Global Minimum Tax By Mr. Michael Keen; Ms. Li Liu; Hayley Pallan

  1. By: Mr. Waikei R Lam; Ms. Marialuz Moreno Badia
    Abstract: In this paper, we present the most comprehensive estimates of China’s government balance sheet to date. Based on these estimates, we show how major shifts in fiscal policy over the last two decades have shaped the health of the public sector prior to the Covid-19 pandemic. We find that, at US$12.5 trillion, China has the largest stock of financial assets in the world. However, its net financial worth as a percent of GDP—though still higher than the large majority of countries—has declined over the last decade. This trend can be traced back to the turn of the century when China undertook a major restructuring of its state-owned enterprises but left important shortcomings in the intergovernmental fiscal system unaddressed. Compounding these risks, reform momentum stalled in the aftermath of the global financial crisis leading to high leverage and falling profitability among state-owned enterprises.
    Keywords: Balance Sheet; China; Debt; Deficit; Local government; State-owned Enterprises; Infrastructure
    Date: 2023–08–04
  2. By: Mr. Michael Keen; Ms. Li Liu; Hayley Pallan
    Abstract: This paper articulates and, using newly-assembled data, explores how international taxation affects aggregate tangible cross-border investment. Spillovers from statutory tax rates abroad seem: As sizable as effects from the host’s rate; larger than previous consensus values (attributed to a systematic bias from FDI data); and consistent with ‘implicit’ profit shifting through real investment (rather than ‘paper’ profit shifting). Contrary to much policy discussion, the results also imply that: Host countries’ marginal effective tax rates have at best a weak effect on real investment; those elsewhere have none; and, applied to the prospective global minimum tax, inward tangible investment in most sample countries will increase.
    Keywords: Corporate Taxation; International Tax; Multinational Investment; Foreign Direct Investment
    Date: 2023–08–04

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