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on Accounting and Auditing |
| By: | Finke, Katharina; Heckemeyer, Jost H.; Spengel, Christoph |
| Abstract: | In their famous Mirrlees review (2011) on reforming the tax system for the 21st century, the authors put forward the introduction of an allowance for corporate equity regime. In recent years, several countries introduced an ACE regime. The main feature of an ACE regime is that it removes tax distortions on marginal investment and finance distortions. Yet, by narrowing the tax base an ACE regime potentially requires an increase in tax rates which might affect location choices and profit shifting activity negatively. In this paper, we employ a microsimulation model to determine the consequences of introducing an ACE regime in Germany. The simulation results show that granting an ACE for corporate income tax purposes results in a revenue loss of about 18%. This could be financed by an increase of the combined profit tax rate by 6 percentage points. At firm level, our analysis illustrates the heterogeneous distribution of the reform effect accross the sample. For 50% of firms between the 25th and 75th percentile, introducing an ACE regime reduces tax payments between 35% and 2%. If the ACE is combined with a tax rate adjustment, the tax effect ranges between -32% and +7.1% for firms between the 25th and 75th percentile. With respect to behavioural responses on decision margins, we find that introducing the ACE reduces the mean debt-ratio by about 1.5 percentage points in the short run. For the capital-stock we arrive at a mean short-term increase of 2.4%. Finally, our computations show that the ACE regime with adjusted profit tax rate cannot be overall tax neutral. In particular, the increase in the profit tax rate required to finance the equity allowance induces intensified outward profit-shifting activities and affects location choices negatively. In the short-run the tax revenue is therefore shown to decline to about 95% of its original level. -- |
| Keywords: | Tax Reform,Allowance for Corporate Equity,Microsimulation,Tax Policy Evaluation |
| JEL: | H25 H32 K34 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:14033&r=acc |
| By: | Diller, Markus; Kortebusch, Pia; Schneider, Georg; Sureth, Caren |
| Abstract: | Tax uncertainty often negatively affects investment. Advance tax rulings (ATRs) are commonly used to provide tax certainty. We analyze ATRs from the taxpayers' and tax authorities' perspectives. Investors request ATRs if the fee does not exceed a certain threshold. We integrate this finding into the tax authorities' decision whether to offer ATRs. We find that ATRs are usually only offered if tax authorities are capable of significantly reducing their tax audit costs or increasing the detection probability. Otherwise, ATRs may be beneficial only if the tax authorities restrict them to classes of investments or use investment-specific fees. These results provide new explanations for why ATRs are currently not as intensively requested by taxpayers as expected against the background of high tax uncertainty. Moreover, the findings help to improve the design of ATRs. -- |
| Keywords: | Advance Tax Rulings,Fee Design,Investment Effects,Tax Risk,Tax Uncertainty |
| JEL: | H21 H25 M41 M42 M48 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:arqudp:167&r=acc |
| By: | Ortmann, Regina; Sureth, Caren |
| Abstract: | In March 2011, the European Commission submitted a proposal for a Council Directive on an optional common consolidated corporate tax base (CCCTB). If this proposed CCCTB system comes into force, taxes calculated under the currently existing system of separate accounting might be replaced by a system of group consolidation and formulary apportionment. Then, multinational groups (MNGs) would face the decision as to whether to opt for the CCCTB system. While prior research focuses mainly on the differences in economic behaviour under both systems in general, we study the conditions under which one or the other tax system is preferable from the perspective of an MNG, with a particular focus on loss offsets. We focus on European MNGs with losses at the parent and subsidiary level. While in our base model, the CCCTB proves to be attractive for temporarily loss-making MNGs, in our extended model we find mixed results. We identify four effects that determine the decision of an MNG: the tax-utilization of losses, the allocation of the tax base, the dividend and intragroup interest taxation. We find, e.g., that the CCCTB system proves advantageous for increasing loss/profit streams (e.g. from start-ups or R&D projects) of the individual group entities, whereas the system of separate accounting is beneficial for decreasing profit/loss streams (e.g. caused by a decrease in return from a mature product). The results of our analysis are helpful for MNGs facing the decision as to whether to opt for the CCCTB system. Moreover, our findings can support legislators and politicians in their tax reform discussions, as we provide information on the possible consequence of implementing this system on the expected decisions of corporate taxpayers that anticipate the tax effects of the CCCTB. -- |
| Keywords: | Loss-Offset,CCCTB,Separate Accounting,Investment Decisions |
| JEL: | H25 H21 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:arqudp:165&r=acc |
| By: | Fochmann, Martin; Kroll, Eike B. |
| Abstract: | We analyze how the redistribution of tax revenues influences tax compliance behavior by applying different reward mechanisms. In our experiment, subjects have to make two decisions. In the first stage, subjects decide on the contribution to a public good. In the second stage, subjects declare their income from the first stage for taxation. Our main results are threefold: First, from an aggregated perspective, rewards have a negative overall effect on tax compliance. Second, we observe that rewards affect the decision of taxpayers asymmetrically. In particular, rewards have either no effect (for those who are rewarded) or a negative effect (for those who are not rewarded) on tax compliance. Thus, if a high compliance rate of taxpayers is preferred, rewards should not be used by the tax authority. Third, we find an inverse u-shaped relationship between public good contribution and tax compliance. In particular, up to a certain level, tax compliance increases with subjects' own contributions to the public good. Above this level, however, tax compliance decreases with the public good contribution. -- |
| Keywords: | tax evasion,tax compliance,redistribution of taxes,tax affectation,rewarding,public good,behavioral economics,experimental economics |
| JEL: | C91 D14 H24 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:arqudp:163&r=acc |
| By: | Benjamin B. Lockwood (Harvard University); Matthew Weinzierl (Harvard Business School, Business, Government and the International Economy) |
| Abstract: | We use official data and standard optimal tax conditions to infer the positive and normative judgments implicit in U.S. tax policy since 1979. We find that explanations within this framework for the time path of U.S. policy require central parameters of the model, namely the elasticity of taxable income or the marginal social welfare weights on top earners, to take unconventional values. We use inferred social preferences to provide novel estimates of the welfare costs of unequal growth and recessions and find that they are sensitive to the assumed distortionary costs of taxation and the year from which preferences are derived. We explore several possible explanations for our findings with available data. |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:14-119&r=acc |
| By: | Gine, Xavier; Martinez Cuellar, Cristina; Mazer, Rafael Keenan |
| Abstract: | An audit study was conducted in peri-urban Mexico to understand the quality of information and products offered to low-income potential customers. Trained auditors visited multiple financial institutions seeking credit and savings products. Consistent with Gabaix and Laibson (2006), staff voluntarily provides little information about avoidable fees, especially to auditors trained to reveal little knowledge about the market. In addition, clients are almost never offered the cheapest product, most likely because staff is incentivized to offer more expensive products that are thus more profitable to the institution. This suggests that disclosure and transparency policies may be ineffective if they undermine the commercial interest of financial institutions. |
| Keywords: | Financial Literacy,Access to Finance,Banks&Banking Reform,Insurance&Risk Mitigation,Emerging Markets |
| Date: | 2014–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6902&r=acc |