nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2024‒06‒10
five papers chosen by

  1. A Global Minimum Tax for Large Firms Only: Implications for Tax Competition By Andreas Haufler; Hayato Kato
  2. Implied Subsidies for Tax Incentives to Increase Wages and Excess Burden in Japan By Toshiyuki Uemura
  3. Taxes, Innovation and Productivity By James Cloyne; Joseba Martinez; Haroon Mumtaz; Paolo Surico
  4. AI, Automation and Taxation By Spencer Bastani; Daniel Waldenström
  5. Mapping the global geography of shell companies By Giulia Aliprandi; Thijs Busschots; Carlos Oliveira

  1. By: Andreas Haufler; Hayato Kato
    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 effects 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 effects of introducing a $15\%$ GMT rate in a calibrated version of our model.
    Date: 2024–04
  2. By: Toshiyuki Uemura (School of Economics, Kwansei Gakuin University)
    Abstract: The wage-increase promotion tax system was introduced in the 2013 tax reform. It is an internationally unique system that aims to increase wages through corporate tax credits. This study focuses on the "hidden subsidies" and excess burdens necessary to make policy decisions about the wage-increase promotion tax credits. The study incorporated the wage-increase tax system into a firm-behavior model for analyzing corporate taxation to present the "implied wage-increase subsidy rate" concept as an indicator of a subsidy’s extent and scope, and a method for measuring the excess burden. It measures the "implied wage-increase subsidy rate" and excess burden using financial data for individual firms. First, the "implied wage-increase subsidy rate" indicates that the wage-increase promotion tax system has expanded the subsidy’s extent and scope. Second, the wage-increase promotion tax credits increase the producer surplus of applicable firms but exponentially increase the excess burden, which is social loss. Third, no significant difference is found in the changes in labor productivity between applicable and non-applicable firms. Global corporate tax reform tends to lean toward a neutral tax system, and the wage-increase promotion tax system may not fit this trend.
    Keywords: wage-increase promotion tax system, implied wage-increase subsidy, excess burden
    JEL: H25 H87
    Date: 2024–05
  3. By: James Cloyne (University of California Davis, NBER and CEPR); Joseba Martinez (London Business School and CEPR); Haroon Mumtaz (School of Economics and Finance, Queen Mary, University of London); Paolo Surico (London Business School and CEPR)
    Abstract: Using a narrative identi cation of tax changes in the United States over the post-WWII period, we document that a temporary cut in corporate income tax rates leads to a long-lasting increase in innovation and productivity, whereas changes in personal income tax rates only have short-term e ects. We show that the results on corporate taxes are consistent with theories of endogenous growth that feature tax amortisation allowances on intellectual property purchases, as in the tax code of most countries in the world. In contrast, personal taxes work primarily through the response of labour supply, which is as transient as the tax change itself.
    Keywords: corporate taxes, narrative identi cation, TFP, R&D, technological adoption.
    JEL: E23 E62 O32 O34 O38
    Date: 2024–04–22
  4. By: Spencer Bastani; Daniel Waldenström
    Abstract: This paper examines the implications of Artificial Intelligence (AI) and automation for the taxation of labor and capital in advanced economies. It synthesizes empirical evidence on worker displacement, productivity, and income inequality, as well as theoretical frameworks for optimal taxation. Implications for tax policy are discussed, focusing on the level of capital taxes and the progressivity of labor taxes. While there may be a need to adjust the level of capital taxes and the structure of labor income taxation, there are potential drawbacks of overly progressive taxation and universal basic income schemes that could undermine work incentives, economic growth, and long-term household welfare. Some of the challenges posed by AI and automation may also be better addressed through regulatory measures rather than tax policy.
    Keywords: AI, automation, inequality, labor share, optimal taxation, tax progressivity
    JEL: H21 H30 O33
    Date: 2024
  5. By: Giulia Aliprandi (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, EU Tax - EU Tax Observatory); Thijs Busschots (EU Tax - EU Tax Observatory); Carlos Oliveira (EU Tax - EU Tax Observatory)
    Abstract: This note examines the global prevalence and distribution of shell companies, which are often used for illicit financial activities like tax evasion. Using business registry data for over 200 jurisdictions, including individual US states, we construct an indicator of shell company prevalence based on the number of registered companies per capita. We find that known tax havens like the British Virgin Islands and the Cayman Islands have extremely high rates of company presence per adult. Zooming in on Europe reveals Estonia as a lesser-known host for shell companies, besides flagging known conduit countries like Luxembourg and Cyprus. A unique decomposition of US states also shows Delaware and Wyoming are potentially hosting a large number of shell companies. Indicative for the role of shell companies in international tax evasion, our shell company prevalence indicator correlates with jurisdiction characteristics catering tax evasion, such as low corporate tax rate and aggressive tax treaties.
    Date: 2023–12

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