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on Accounting and Auditing |
| By: | Johannes Becker; Ronald B. Davies |
| Abstract: | The predominant model of tax induced transfer pricing is based on the assumption that profit shifting is due to insufficient enforcement. However, evidence shows that the firms responsible for most profit shifting are also among the most frequently audited. We present an alternative model based on negotiations that avoid costly, yet uncertain, formal proceedings (e.g. court procedures). This model predicts that profit shifting increases in the tax gap even though enforcement is perfect. Further, it suggests that current efforts to streamline international tax law may have the unintended effect of increasing profit shifting. |
| Keywords: | Nash bargaining; Transfer pricing; Tax avoidance; Corporate taxation |
| JEL: | H25 H32 H87 |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:201527&r=acc |
| By: | Mogues, Tewodaj; Caceres, Leonardo; Fernandez, Francisco A.; Umarji, Mariam B. |
| Abstract: | This paper on Mozambique is part of a set of four country case studies that take a detailed look at public expenditures in agriculture, and at how the data on expenditures are captured in government financial and budget accounts. The objective of these studies is to unpack the “black box†of country-level public expenditure statistics reported in various cross-country datasets and ultimately to enable the use of existing government accounts and their classification and coding systems to identify levels and compositions of government agriculture expenditures, with a better understanding of what these data are in fact accounting for. This Mozambique case study finds that the administrative classification of public expenditures and budgets should be used as the primary source for reconstructing public expenditures in agriculture, because it offers the richest and most detailed disaggregation of spending data. However, it needs to be complemented by the use of Mozambique’s programmatic classification of expenditures—while this categorization is less detailed, it is necessary in order to identify sources of agricultural spending that emanate from agencies not primarily mandated to support the sector. Our reconstructed agricultural expenditure figures suggest that existing reported figures may underestimate the true total amount of public resources going to the agricultural sector. |
| Keywords: | public expenditure, agriculture, agricultural policies, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1474&r=acc |
| By: | Jean Luc Erero |
| Abstract: | This paper analyses the effects of increases in value added tax (VAT) through a dynamic computable general equilibrium model. The database of the model encompasses a social accounting matrix (SAM) for the year 2010. All the important South African taxes are included in the SAM and the household sectors are disaggregated according to income deciles, with the top decile being further split into five groups. Five different simulations are performed, ranging from 1% increase in the VAT to 5% over the period 2012 to 2018. Our findings show that the percentage increase in VAT would not affect lower income households negatively if the higher government revenue flowed to the lower income households. For example, the 1% increase in the VAT rate impacts on the investment through the price of capital. The change in investment means that any adjustment in capital stock will affect the production and demand for labour that might impact on the standard of living of all income groups. The GDP increases slightly by 0.02173% in 2013 and reports a positive change for the period between 2013 and 2018. This shows that in the short run the GDP depends on other variables such as investment and consumption, which likewise are positively affected by this shock. |
| Keywords: | value added tax, computable general equilibrium model, South Africa |
| JEL: | C68 E62 H21 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:rza:wpaper:558&r=acc |
| By: | Zsolt Darvas (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences and Bruegel and Corvinus University of Budapest) |
| Abstract: | Highlights - Global current account imbalances widened before the 2007/2008 crisis and have narrowed since then. While the post-crisis adjustment of European current account deficits was in line with global developments (though more forceful), European current account surpluses defied global trends and increased. - We use panel econometric models to analyse the determinants of medium-term current account balances. Our results confirm that higher fiscal balances, higher GDP per capita, more rapidly aging populations, larger net foreign assets, larger oil rents and better legal systems increase the medium-term current account balance, while a larger growth differential and a higher old-age dependency ratio reduce it. - European current account surpluses became excessive during the past twelve years according to our estimates, while they were in line with model predictions in the preceding three decades. - Generally, the gap between the actual current account and its fitted value by the model has a strong predictive power for future current account changes. Excess deficits adjust more forcefully than excess surpluses. However, in the 2004-07 period, excess imbalances were amplified, which was followed by a forceful correction in 2008-15, with the exception of European surpluses. |
| Keywords: | Current account imbalances; Current account adjustment |
| JEL: | F32 F41 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:1542&r=acc |
| By: | Mariarosaria Comunale (Economics Department, Bank of Lithuania) |
| Abstract: | Using the IMF Consultative Group on Exchange Rate Issues methodology, we make an assessment of the current account and price competitiveness of the Central Eastern European Countries that joined the EU between 2004 and 2014. We present results for the “Macroeconomic Balance” approach, which provides a measure of current account equilibrium based on its determinants together with misalignments in real effective exchange rates. We believe that a more refined analysis of the misalignments may useful for the Macroeconomic Imbalance Procedure. This is especially the case for these countries, which have gone through a transition phase and boom/bust periods since their independence. Because such a history may have influenced a country’s performance, any evaluation must take account of each country’s particular characteristics. We use a panel setup of 11 EU new member states (incl. Croatia) for the period 1994-2012 in static and dynamic frameworks, also controlling for the presence of cross-sectional dependence and checking specifically for the role of exchange rate regimes, capital flows and global factors. We find that the estimated coefficients of the determinants meet with expectations. Moreover, the foreign capital flows, the oil balance, and relative output growth seem to play a crucial role in explaining the current account balance. Some global factors such as shocks in oil prices or supply might have played a role in worsening the current account balances. Having a pegged exchange rate regime (or being part of the euro zone) affects the current account positively. The real effective exchange rates behave in accord with the current account gaps, which clearly display cyclical behaviour. The current accounts and real effective exchange rates come close to equilibria in 2012 in most of the countries and the rebalancing is completed for some countries that were less misaligned in the past, such as Poland and Czech Republic, but also for Lithuania. When foreign direct investments are introduced as a determinant for these countries, the misalignments are larger in the boom periods (positive misalignments) whereas the negative misalignments are smaller in magnitude. |
| Keywords: | real effective exchange rate, Central Eastern European Countries, EU new member states, fundamental effective exchange rate, current account. |
| JEL: | F31 F32 C23 |
| Date: | 2015–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:360&r=acc |
| By: | Bibek Adhikari (Department of Economics, Tulane University) |
| Abstract: | Theoretical prediction that a value-added tax (VAT) does not distort firms' production decisions has led to its rapid adoption worldwide, but there is surprisingly little empirical evidence. This paper provides one of the first causal estimates of the efficiency gains of introducing a VAT in a worldwide sample of countries. I compute the counterfactual trajectory of GDP per worker in the absence of a VAT using synthetic controls, which is a weighted average of countries without a VAT that closely resembles the economic structure and outcomes of the country with a VAT for several years before the adoption of a VAT. In line with previous studies, I find that the VAT has, on average, positive and economically meaningful impact on economic efficiency. However, this result is driven by richer countries only. There is no significant impact of the VAT on poorer countries. I find similar results when estimating the impact of the VAT on total factor productivity and capital stock per worker, two important channels through which a VAT affects economic efficiency. This paper provides evidence that a success of VAT almost entirely depends on the initial level of income of a country, which, in result, determines whether a country is able to properly design and enforce a VAT. The findings are robust across a series of placebo studies and sensitivity checks. |
| Keywords: | value-added tax, economic efficiency, synthetic control methods |
| JEL: | H20 H25 O40 E6 |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:tul:wpaper:1524&r=acc |
| By: | Birg, Laura |
| Abstract: | This paper studies the effect of an online retailer on spatial tax competition with cross-border shopping. For low fixed cost of online shopping, the online retailer is active in both markets and tax rates are higher in the online equilibrium than in the online equilibrium. For intermediate fixed cost of online shopping, the online retailer is active in only one market and tax rates are lower in the online equilibrium than in the online equilibrium. For asymmetric countries, the entry of the online retailer may disperse or reverse the tax differential. |
| Keywords: | tax competition,cross-border shopping,online retailer |
| JEL: | F12 H20 L13 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:265&r=acc |
| By: | Fochmann, Martin; Haak, Marcel |
| Abstract: | We investigate the strategic decision making of audit firms in a tendering process. In particular, we are interested in how audit firms behave to acquire audit clients and which audit quality is ensured. Our main findings are manifold. First, if two big audit firms are competing, we do not observe that each firm tries to acquire all clients. However, if one big and one small audit firm are competing, we find evidence that the big audit firm generally apply strategies to acquire all available clients. In contrast, the small audit firm uses a clear "Guerilla Strategy" which means that the firm concentrates only on few clients whereas the other clients are almost ignored. Second, small audit firms are better off if more clients do exist in the tendering process. Thus, the legislator should ensure that more audit clients are tendered if the competitiveness of smaller audit firms should be enhanced. Third, in a situation in which the competitive advantage of big audit firms increases over-proportionally, we do not observe that big audit firms are able to decrease the market share of small audit firms markedly or are even able to push small audit firms out of the market. Fourth, we find that the quality level of an audit is higher if the client is acquired by a small audit firm. This implies that increasing the number of smaller audit firms could increase the quality level of the audit market. |
| Keywords: | tendering process,behavioral accounting,experimental economics |
| JEL: | M42 C91 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:arqudp:197&r=acc |