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on Accounting and Auditing |
| By: | Ruby Doeleman; Dominika Langenmayr; Dirk Schindler |
| Abstract: | Since 2016, Country-by-Country reporting has provided tax authorities with detailed information about multinationals’ worldwide activities. It has been hailed as a game-changer for corporate taxation, enabling tax authorities to target multinational firms with high profits in tax havens. We model Country-by-Country reporting as increasing both tax planning and audit costs for profit-shifting multinationals, where the latter costs depend on the share of profits held in tax havens. Then, Country-by-Country reporting makes shifting profits from a high-tax country to a tax haven relatively more attractive than shifting from a low-tax country to a tax haven—a substitution effect. Thus, while the total amount of profits shifted to the tax haven decreases, profit shifting from high-tax affiliates may increase relative to the situation without Country-by-Country reporting. We confirm these changes in profit-shifting patterns using a staggered difference-in-differences design. The opposing effects for low-tax and high-tax countries also help explaining the mixed findings of previous empirical studies on Country-by-Country reporting. |
| Keywords: | country-by-country-reporting, profit shifting, anti-tax-avoidance rules |
| JEL: | H25 H26 F23 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11464 |
| By: | Katarzyna Bilicka; Michael Devereux; İrem Güçeri; Katarzyna Anna Bilicka; Michael P. Devereux; Irem Guceri |
| Abstract: | Many multinational firms (MNEs) pay low or no corporation tax in high-tax countries because they shift taxable income to tax havens. We incorporate nonconvex costs of profit shifting and unobserved heterogeneity in profit-shifting ability in the MNEs’ value maximization problem to study responses of firms to tax policies. We estimate our model using UK corporate tax returns data and quantify: (i) the elasticities of tax base and capital stock with respect to tax rates, (ii) the fixed and variable components of profit-shifting costs for different firm types, and (iii) the government’s trade-off between raising tax revenue by reducing profit shifting and attracting investment. Accounting for extensive margin profit-reporting decisions, we reconcile most of the discrepancies between previous micro- and macro-level estimates of tax base elasticities. We test the predictions of the model using a quasi-natural experiment that restricted profit-shifting by Italian MNEs that operated in the UK and evaluate two types of tax policies that can be analyzed using our approach. |
| Keywords: | taxation, profit shifting, multinational firms, investment |
| JEL: | H25 H26 H32 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11458 |
| By: | Sergio A. Correia; Stephan Luck; Emil Verner |
| Abstract: | Can bank failures be predicted before they happen? In a previous post, we established three facts about failing banks that indicated that failing banks experience deteriorating fundamentals many years ahead of their failure and across a broad range of institutional settings. In this post, we document that bank failures are remarkably predictable based on simple accounting metrics from publicly available financial statements that measure a bank’s insolvency risk and funding vulnerabilities. |
| Keywords: | bank runs; financial crises; deposit insurance; bank failures |
| JEL: | G01 G2 |
| Date: | 2024–11–22 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:99163 |
| By: | Gipper, Brandon (Stanford U); Gu, Laura Lingyu (U of Chicago); Kim, Jinhwan (Stanford U); Noh, Suzie (Stanford U) |
| Abstract: | Using debit and credit card data, we find a one standard-deviation increase in firms’ earnings surprise is linked to a 3% or $5.6 billion increase in aggregate quarterly consumption of local households near the disclosing firms’ headquarters. The effect is more pronounced when earnings news is informative about local households’ wealth, is widely disseminated through media, and is more intensely searched by locals. The change in consumption is concentrated in less expensive goods, such as dining out, and among various local stakeholders, including employees and business owners. Consistent with households not being able to unravel fraud, their consumption reacts even to fraudulent earnings, which reverses only after the fraud is revealed. To corroborate our mechanism, we conduct a nationwide survey of 500 randomly selected households. Nearly 50% of the respondents say their spending decisions are influenced by the financial news of local firms via its effect on local job or investment opportunities. Our findings yield important policy implications of financial reporting on household welfare. |
| JEL: | D12 D15 D80 D81 E21 M41 |
| Date: | 2024–02 |
| URL: | https://d.repec.org/n?u=RePEc:ecl:stabus:4163 |
| By: | Jelena Galijaš (National Bank of Serbia) |
| Abstract: | Using the simulation-based approach, this paper aims to investigate the influence of operational problems which occur at two most important prticipants on the system as a whole as well as on the other participants of the payment system of the National Bank of Serbia. To the best of our knowledge, this is the first paper which examines, by use of simulations, the consequences of operational problems ocurring at the participants of the payment system of the National Bank of Serbia. Two scenarios were examined. In the first scenario, the most important participant is facing operational problems, while in the second scenario operational problems at two most important participants were supposed. Restrictively designed scenarios show that operational problems at the most important participants can seriously affect other participants' ability to settle their payments. In addition, in order to capture possible behavioral reactions by other participants, we investigate whether the application of the stop-sending rule can reduce the magnitude of contagion. We find that the application of this rule can substantially reduce the effects of the operational problems. However, the rule also reduces the number of transactions in the system as well as the total turnover. At the end, we determined the probabilty of defaults for each account used in our analysis. |
| Keywords: | financial reports, regulatory reports, financial soundness indicators, S-scor? model, stress testing |
| JEL: | G01 G17 G21 |
| Date: | 2023–03 |
| URL: | https://d.repec.org/n?u=RePEc:nsb:bilten:14 |