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on Accounting and Auditing |
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Issue of 2024‒05‒20
seven papers chosen by |
| By: | Valeria Merlo; Georg Wamser |
| Abstract: | This chapter reviews the literature providing empirical estimates on the tax elasticity of multinational profits and discusses the challenges faced when attempting to quantify tax-motivated profit shifting. We first use micro-level data to show that multinational corporations hold a disproportionately large share of profits and financial assets in tax havens, relative to real activities in these countries. We then argue that tax notches associated with anti-tax avoidance legislation may be exploited to better understand tax-motivated profit shifting. This approach suggests a semi-tax elasticity of pre-tax profits of about 0.22, which is substantially smaller than estimates provided in earlier studies. |
| Keywords: | corporate income taxes, profit shifting, tax havens, multinational corporations |
| JEL: | H25 H26 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11045&r=acc |
| By: | Andreas Hauer (Seminar for Economic Policy, LMU); Hayato Kato (Graduate School of Economics, Osaka University) |
| Abstract: | The Global Minimum Tax (GMT) is applied only to firms above a certain size threshold. We set up a simple model of tax competition and profit shifting by heterogeneous multinational firms to evaluate the e ects of this partial coverage of the GMT. A non-haven and a haven country are bound by the GMT rate for large multinationals, but can set tax rates for firms below the threshold non-cooperatively. We show that the introduction of the GMT with a moderate tax rate increases tax revenues in both the non-haven and the haven countries. Gradual increases in the GMT rate, however, trigger a sudden change in the tax competition equilibrium from a uniform to a split corporate tax rate, at which tax revenues in the non-haven country decline. In contrast, gradual increases in the coverage of the GMT never harm the non-haven country. We also discuss the quantitative e ects of introducing a 15% GMT rate in a calibrated version of our model. |
| Keywords: | multinational firms; tax avoidance; profit shifting; tax competitionInput-output |
| JEL: | F23 H25 H87 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:2406&r=acc |
| By: | Glenn P. Jenkins (Department of Economics, Queens University, Kingston, Ontario, Canada, K7L3N6 and Cambridge Resources International Inc.); Mikhail Miklyaev (Department of Economics, Queens University, Kingston, Ontario, Canada, K7L3N6 and Cambridge Resources International Inc.); Owotomiwa Christiana Olubamiro (Cambridge Resources International Inc.); Siamand Hesami (Department of Banking and Finance Eastern Mediterarrean University and Cambridge Resources International Inc.) |
| Abstract: | In Finland, over 98% of the compliance costs incurred by VAT-registered entities are borne on micro, small and medium taxpayers. The Finnish Tax Administration (FTA) project "Design and Implementation of a New VAT Reporting Model" is an analysis of three interventions to enhance the current tax administration system. The three interventions are to expand the information collected on the VAT return (stage 1), to introduce electronic reporting of VAT invoices by all taxpayers to the FTA (stage 2), and finally, for the FTA to pre-fill the VAT returns for small, medium and micro taxpayers (stage 3). A Cost-Benefit Analysis approach is used to evaluate these proposals for potential implementation by measuring the potential costs and benefits of each stage of the reforms. The project's main aim is to increase tax revenues (reduce the tax gap) and reduce the economic costs associated with administration and compliance with the value-added tax (VAT) legislated obligations. Of the three interventions evaluated, the largest net economic benefits are created by the administrative pre-filling of the Value Added Tax returns. |
| Keywords: | Cost-Benefit Analysis, VAT, Compliance Cost, Micro & SME enterprises, Electronic Invoicing, Pre-Filled VAT Returns, Finland. |
| JEL: | D61 H21 H24 H26 |
| Date: | 2024–04–18 |
| URL: | http://d.repec.org/n?u=RePEc:qed:dpaper:4617&r=acc |
| By: | Matej Lorko; Tomas Miklanek; Maros Servatka |
| Abstract: | While nudges have recently gained popularity, many nudging interventions fail, and the effects of successful ones are often short-lived. We conjecture that the success of a nudge depends on how it interacts with the underlying economic incentives that determine the payoffmaximizing behavior of the decision-maker. For example, in the domain of tax compliance, a nudge is likely to be effective only if it is financially optimal for the taxpayer to pay the tax. To test our conjecture, we run a multi-period experiment in which we manipulate tax audit probability, and nudge participants to report their income. In addition, we vary how often the nudge appears, to test whether more frequent nudging increases long-run compliance. We observe that the first application of a nudge has a positive immediate effect on income reporting irrespective of whether it is optimal to comply or not. However, subsequent nudges increase income reporting only if the nudge is aligned with the taxpayer’s incentives. More frequent nudging in the direction opposite to incentives yields no effects on long-run compliance. Policy implications are discussed. |
| Keywords: | nudge, incentives, tax compliance, experiment |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp777&r=acc |
| By: | Oliver Binz; John Graham; Matthew Kubic |
| Abstract: | Financial reports present assets, liabilities, and earnings on a nominal basis (unadjusted for inflation). Using a novel dataset of nearly a century of financial reports, this paper examines whether and how inflation affects the relation between accounting earnings and stock market value, i.e., earnings relevance. On the one hand, inflation may decrease earnings relevance as historical cost accounting relies on historical transaction prices that become less relevant when inflation changes the price level. On the other hand, inflation may increase earnings relevance by increasing firms’ discount rates and thereby shifting agents’ focus towards nearer-term payoffs. Consistent with the latter hypothesis, we document a strong positive relation between earnings relevance and inflation. Cross-sectional tests indicate that this relation is stronger for firms that are more sensitive to discount rate changes. We find that inflation is of first-order importance relative to determinants of earnings relevance explored in prior literature. |
| JEL: | E31 G10 M40 M41 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32364&r=acc |
| By: | Timothy Meyer |
| Abstract: | U.S. equity outperformance and sustained dollar appreciation have led to large valuation gains for the rest of the world on the U.S. external position. I construct their global distribution, carefully accounting for the role of tax havens. Valuation gains are concentrated and large in developed countries, while developing countries have been mostly bypassed. To assess the welfare implications of these capital gains, I adopt a sufficient statistics approach. In contrast to the large wealth changes, most countries so far did not benefit much in welfare terms. This is because they did not rebalance their portfolios and realize their gains, while they were further hurt by rising import prices from the strong dollar. |
| Keywords: | Foreign Assets, Global Imbalances, Valuation Effects |
| JEL: | F21 F32 F40 G15 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_534&r=acc |
| By: | Heckemeyer, Jost H.; Schulz, Inga; Spengel, Christoph; Winter, Sarah |
| Abstract: | This paper evaluates the Multilateral Convention to implement Pillar I Amount A, released by the OECD in October 2023, and the alternative proposal of Art. 12B for tax treaties suggested by the UN, with a particular emphasis on the perspective of developing countries. We conduct a comparative analysis of the proposals using an integrated economic and legal approach. Our assessment is based on the two proposals' ability to generate tax revenue and their implications for net-importing countries. Our legal analysis demonstrates significant differences between the two proposals in the implied reallocation of taxing rights, depending on the considered (digital) business model. Interestingly, we find that overall and despite its complexity, Pillar I Amount A addresses the specific interests of developing countries better than Art. 12B UN Model. In particular, Pillar I Amount A will likely outperform the UN's proposal in terms of its tax revenue potential. |
| Keywords: | Digital Economy, Corporate Tax, Global Tax Reform, OECD Pillar 1, Developing Countries |
| JEL: | F23 H25 H32 K34 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:290402&r=acc |