nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2023‒11‒27
five papers chosen by

  1. Organizational capacity and profit shifting By Katarzyna Bilicka; Daniela Scur
  2. Value Added Tax in the Extractive Industries By Artur Swistak; Nate Vernon
  3. Tax simplicity or simplicity of evasion? Evidence from self-employment taxes in France By Philippe Aghion; Ufuk Akcigit; Maxime Gravoueille; Matthieu Lequien; Stefanie Stantcheva
  4. Welfare Effects of Indirect Tax Policies in West Africa By Bart Capéau; Alain Babatoundé; Romain Houssa
  5. Risk management in Islamic finance: Beyond conventional norms By Jihane Jaouad; Ali Ouchekkir

  1. By: Katarzyna Bilicka; Daniela Scur
    Abstract: Good organizational capacity drives productivity and potential taxable profits but may also enable multinationals (MNEs) to more efficiently re-allocate profits across tax jurisdictions, lowering actual taxable profits. We show that MNE subsidiaries with better organizational capacity report significantly lower profits and have a higher incidence of bunching around zero reported profitability in high-tax countries. This pattern is not present in low-tax countries. Further, responsiveness to corporate tax rate changes in terms of profit reporting is driven by firms with good organizational capacity. We show our results are consistent with profit-shifting behavior and rule out key alternative channels.
    Keywords: Organizational capacity, profit shifting, innovation, diffusion
    Date: 2022–12–06
  2. By: Artur Swistak; Nate Vernon
    Abstract: Lower capacity countries often struggle to administer the Value Added Tax (VAT) in the extractive industries, partly due to the large VAT refunds needs of this capital and export-intensive sector. Assuming that the first-best policy (apply the standard VAT to the extractive industry) is not possible in the medium-term, what should countries do? This paper systemically analyzes second-best VAT policy designs considering the impact of the VAT on three key stakeholders: the investor, domestic suppliers, and the tax administration. The analysis concludes that the generally preferred policy is to provide a VAT exemption for imports and either fully tax or exempt domestic supplies, although country characteristics (and, specifically the relative weighting of stakeholders) matter. Moreover, governments should make efforts to shorten refund delays and transition to a standard VAT over the longer-term.
    Keywords: value added tax; tax policy; extractive industries; fiscal regime design; mining; hydrocarbons
    Date: 2023–10–27
  3. By: Philippe Aghion; Ufuk Akcigit; Maxime Gravoueille; Matthieu Lequien; Stefanie Stantcheva
    Abstract: We exploit individual panel information from introducing of new and simpler tax regimes for the self-employed in France, in order to assess the extent to which individuals' shift towards the new regimes is driven by a quest for tax simplicity, and the extent to which the demand for tax simplicity is itself at least partly driven by tax evasion motives. We find evidence of a quest for tax simplicity from observing a significant amount of bunching at the eligibility thresholds for the simpler self-employment tax regimes and from the fact that bunching is increasing in the degree of simplicity of the self-employment regime. We also argue that tax evasion plays an important role in accounting for individuals' attraction towards simpler tax regimes. Finally, we quantitatively assess the importance of simplicity and evasion motives for choosing a simpler self-employment regime. More precisely, we combine bunching estimates and a structural model to jointly estimate the real income elasticities, the value of tax simplicity, and the evasion elasticity. We find that the parameters values which generate the best fit with the observed bunching across different tax brackets and years, imply noticeable preference for tax simplicity with a sizeable evasion elasticity behind it, and a negligible real income elasticity.
    Keywords: tax simplicity, simplicity of evasion, taxation of self-employment, France
    Date: 2023–05–05
  4. By: Bart Capéau; Alain Babatoundé; Romain Houssa
    Abstract: In West Africa, the Value Added Tax (VAT) policy consists of a standard tax rate, but several items are exempted. We provide an optimal tax framework to reflect on the welfare effects of such a tariff structure, in the context of current debates on domestic resource mobilisation in low-income countries (LICs). Our analysis includes the distinguishing feature that a significant part of the consumption goods in LICs stems from own production, and can therefore not be taxed. We also account for preference heterogeneity over market goods and auto-consumption. A preference consistent individual welfare measure is used. Individual welfare levels are aggregated by social welfare functions with different degrees of inequality aversion. In this setting, we show that a uniform tax rate on all market goods is not optimal, even in the absence of inequality aversion. An application with household data from Benin supports reforms for alternative welfare improving VAT rate structures. In comparison to the current VAT policy, our reforms yield higher average relative welfare gains for the lower deciles. Due to preferences heterogeneity, however, we find winners and losers in all welfare deciles. We develop a bootstrap procedure to construct confidence intervals on welfare indicators.
    Keywords: Africa, Value Added Tax (VAT), Optimal taxation, Taste heterogeneity, Domestic
    Date: 2023–11
  5. By: Jihane Jaouad (LERSG - Laboratoire d’Études et de Recherches en Sciences de Gestion, FSJES – Agdal, Université Mohammed V de Rabat. Maroc.); Ali Ouchekkir (LERSG - Laboratoire d’Études et de Recherches en Sciences de Gestion, FSJES – Agdal, Université Mohammed V de Rabat. Maroc.)
    Abstract: At a time when Islamic finance is experiencing rapid growth worldwide, it is essential to better understand and deepen risk management within this sector to strengthen its resilience and stability. The aim of this article is to analyze the specific risks inherent in Islamic finance and the corresponding approaches to risk management. It also examines the relevance and applicability of the Basel prudential accords to the specific context of Islamic banks. Greater harmonization between Islamic financial practices and international regulatory standards will contribute to the emergence of a stronger, more innovative Islamic financial sector, aligned with the ethical principles of Sharia law. To achieve this objective, our research is based on a theoretical and conceptual approach. To this end, an in-depth literature review is conducted with the aim of clarifying the key underlying concepts and presenting the various risks facing Islamic finance. Historical developments and current risk management methodologies are also reviewed. The results show that Islamic finance faces a wide range of threats, encompassing both generic risks common to the financial sector and specific risks arising from its religious ethos. While significant progress has been made in terms of risk management, more needs to be done to adapt existing tools and frameworks to the particularities of Islamic participative finance. The new prudential requirements introduced in Basel III appear insufficiently calibrated to the singularities of Islamic banking. Implications point to the need to develop innovative solutions aligned with Sharia precepts, while regulators are called upon to design a tailor-made prudential framework to support this rapidly expanding sector. Although limited to the banking sector, this documented research fills a gap in the literature on a subject that is both crucial and little investigated, providing a solid foundation for future academic work and informing the thinking and decisions of industry practitioners.
    Abstract: Alors que la finance islamique connaît une croissance rapide à l'échelle mondiale, il est essentiel de mieux comprendre et d'approfondir la gestion des risques au sein de ce secteur pour renforcer sa résilience et sa stabilité. Cet article a pour objectif d'analyser les risques spécifiques inhérents à la finance islamique ainsi que les approches correspondantes en matière de gestion des risques. Il examine également la pertinence et l'applicabilité des accords prudentiels de Bâle au contexte particulier des banques islamiques. Une meilleure harmonisation entre les pratiques financières islamiques et les normes réglementaires internationales, contribue à l'émergence d'un secteur financier islamique plus solide, innovant et aligné sur les principes éthiques de la Charia. Pour atteindre cet objectif, notre recherche s'appuie sur une approche théorique et conceptuelle, pour ce faire, une revue de littérature approfondie est conduite dans le but de clarifier les concepts-clés sous-jacents et de présenter les différents risques auxquels la finance islamique est confrontée. L'évolution historique et les méthodologies actuelles de gestion des risques sont également passées en revue. Les résultats mettent en évidence que la finance islamique fait face à un large éventail de menaces, englobant à la fois des risques génériques communs au secteur financier, mais également des risques spécifiques découlant de son éthique religieuse. Si des progrès significatifs ont été accomplis concernant la maîtrise des risques, des efforts restent à fournir pour adapter les outils et cadres existants aux particularités de la finance participative islamique. Les nouvelles exigences prudentielles instaurées dans Bâle III apparaissent insuffisamment calibrées vis-à-vis des singularités des banques islamiques. Les implications soulignent la nécessité de développer des solutions innovantes alignées sur les préceptes de la Charia, tandis que les autorités de régulation sont appelées à concevoir un cadre prudentiel sur-mesure pour soutenir ce secteur en pleine expansion. Bien que limitée au secteur bancaire, cette recherche documentée comble un manque dans la littérature sur un sujet à la fois crucial et peu investigué, fournissant ainsi une base solide pour de futurs travaux académiques et éclairant les réflexions et décisions des praticiens du secteur.
    Keywords: Islamic finance, Conventional finance, Risk, Risk management, Basel accords, Finance islamique, Finance conventionnelle, Risque, Gestion des riques, Accords de Bale
    Date: 2023–08–25

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