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on Accounting and Auditing |
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Issue of 2024‒07‒22
six papers chosen by |
| By: | Goldbach, Stefan; Harms, Philipp; Jochem, Axel; Nitsch, Volker; Weichenrieder, Alfons J. |
| Abstract: | In some countries, a sizable fraction of savings is derived from corporate savings. Although larger, traded corporations are often co-owned by foreign portfolio investors, current international accounting standards allocate all corporate savings to the host country. This paper suggests a framework to correct for this misleading attribution and applies this concept to Germany. For the years 2012 to 2020, our corrections retrospectively reduce German savings and consequently the German current account surplus by, on average, €11.5bn annually. This amounts to lowering Germany’s average official current account surplus (€226.6bn) across these years by approximately five percent. |
| Date: | 2024–06–10 |
| URL: | https://d.repec.org/n?u=RePEc:dar:wpaper:145780&r= |
| By: | Friedrich, Christian; Quick, Reiner; Schmidt, Florian |
| Abstract: | There is an ongoing debate among regulators and researchers about concerns that the provision of non‐audit services (NAS) to audit clients may impair audit quality by reduced independence. In this context, there can be different perspectives on audit quality. Given recent regulatory changes in the European Union (EU) aimed to improve investor confidence in audited financial statements, it is critical to understand the association of NAS and audit quality perceptions by investors before and after the regulation. We investigate whether NAS affect shareholder and lender perceptions of audit quality, measured by the cost of debt and equity capital. For a sample of German firms, we find significant positive associations of NAS with both cost of debt and cost of equity. Other assurance and consultancy services drive this effect. We do not find this effect in the pre‐regulation period, but in the transition period when the regulation was passed but NAS restriction did not yet apply. In the post‐regulation period, it only persists for lenders. Thus, the EU regulation may have increased (or inadequately created) independence concerns for shareholders and lenders and curbed these concerns for shareholders only. |
| Date: | 2024–06–11 |
| URL: | https://d.repec.org/n?u=RePEc:dar:wpaper:145876&r= |
| By: | Mahieux, Lucas (Tilburg University, School of Economics and Management) |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:tiu:tiutis:5dd826be-1379-4456-a9c2-e1ab9d259ae6&r= |
| By: | Jarkko Harju (Tampere University); Kaisa Kotakorpi (Tampere University); Tuomas Matikka (VATT Institute for Economic Research); Annika Nivala (VATT Institute for Economic Research) |
| Abstract: | We analyze firm responses to risk-based tax audits – a central tool in regular tax enforcement – using full-population data on tax audits and tax returns in Finland. We find an immediate and persistent increase in reported profits by the audited firms after being audited compared to matched non-audited firms with a similar development in key outcomes before the audit. This is an indication of significant non-compliance in the baseline. We also examine the anatomy of non-compliance and find that both revenue and labor costs increase after audits, suggesting that some firms may follow a strategy of under-reporting their overall scale of operation. We use novel data on bankruptcy petitions and court decisions to investigate whether stricter tax enforcement has implications for real economic activity. We find a large increase in the likelihood of bankruptcy after audits among non-compliant firms, but no increase in bankruptcies for compliant firms. |
| Keywords: | tax compliance; tax evasion; tax enforcement; firm behavior |
| JEL: | H26 H32 H83 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:fit:wpaper:22&r= |
| By: | Hirofumi Takikawa (Faculty of Economics and Business Administration, Goethe University Frankfurt, GERMANY and Junior Research Fellow, Research Institute for Economics & Business Administration (RIEB), Kobe University, JAPAN) |
| Abstract: | The United Nations' "2030 Agenda for Sustainable Development" highlights the importance of formalizing the informal economy, which could potentially increase tax revenues in developing countries. This paper investigates the impact of formalization on optimal tax schedules, emphasizing the need for redistributive incentives alongside formalization. Extending the Mirrlees model to incorporate government intervention against the informal economy, we propose an optimal tax formula. Quantitative analysis shows that aligning the tax schedule with formalization increases tax revenue and income transfers while maintaining social welfare. The result can be interpreted as an implicit cost of welfare-neutral formalization in terms of tax revenues and income transfers. Conversely, leaving the tax schedule unchanged undermines these benefits. This research provides insights into the design of optimal tax policies that incorporate formalization. |
| Keywords: | Informal economy; Formalization; Income tax; Redistribution |
| JEL: | E26 H21 H26 J46 O17 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:kob:dpaper:dp2024-18&r= |