Implementing problematic tax regulation: Hysteresis and bureaucratic revolutionaries within tax administrations

Worldwide emerging demands for additional and more sophisticated regulation are triggering regulatory changes at the national level that not all tax authorities are prepared to implement effectively. We examine this phenomenon through a single case study concerned with the implementation of the problematic transfer pricing rule by the Chilean tax authority. Drawing on semi-structured interviews, other qualitative sources, and inspired by the lesser used Bourdieusian constructs of hysteresis and bureaucratic revolutionaries, we unravel the emergence, persistence and resolution of hysteresis, i.e., a misalignment between tax administration practices and the expectations imposed on that organisation within the broader tax field. The paper finds that attempts to internationalise the tax system when regulators were inexperienced gave rise to hysteresis. It also explores how the standard of the rule, in conjunction with other structural conditions, influenced the decisions of senior tax officials, thus contributing to the persistence of hysteresis within the tax authority. Finally, it illustrates how one very senior tax official, with an interest in the regulation, acted as a bureaucratic revolutionary to resolve hysteresis and make the rule work in practice.     

Regional favoritism and tax avoidance: evidence from China

This paper investigates the effect of officials’ regional favoritism on corporate tax avoidance activity in China. We find that firms located in regions that were formerly administered by the current provincial governors have a higher level of tax avoidance than other firms in the province. Further evidence indicates that regional favoritism affects tax avoidance through two channels: regional politicians’ personal connections with the governor and firms’ political access to the governor. Overall, the findings support China's current official selection and promotion guidelines that restrict hometown favoritism. Our results further imply that favoritism can also extend to officials’ former administrative regions.     

Book Reviews

References to ‘customers’ have become commonplace in the policy discourses within UK government and other public sector bodies. It is a working assumption of UK public sector management that the concept of the ‘customer’ can be applied to any public sector service agency or department; and this paper analyses how the UK government's revenue department, formerly titled the Inland Revenue (IR), re-characterised firstly taxpayers and latterly tax claimants as ‘customers’, rather than ‘users’, of IR services. This paper identifies some problems, dilemmas and ambiguities associated with this reconceptualisation in the context of an organisation that is predominantly a regulating department. Far from being merely a reclassification of the taxpayer as customer, the emerging discourse and associated practices of the IR were in part embedded in organisational change, including the merger with HM Customs and Excise to form the present-day HMRC. Thus this case analysis illustrates the limits of consumerism as a strategic tool of a government revenue department and raises wider questions for public management.     

A new test for equitable real estate tax assessment

Paglin and Fogarty (1972) proposed a correct conceptual view of equitable property tax assessment, but attempts to find an empirical test of their model have become mired in technical issues. The new empirical test proposed here is based on the notion that the market value of an individual property is essentially unobservable.Empirical results for 52 towns in Connecticut show that the new model (a 2SLS procedure) removes a substantial part of the biases present in other tests. Moreover, the 2SLS procedure provides a method for removing the time trend from sales prices. Thus, sales prices can be adjusted to the date of assessed value allowing evaluation of assessment practices as opposed to assessment lags. This refines previous approaches, and it substantially expands the number of transactions that can be used to evaluate equity in property tax assessment practices.     

爱尔兰、英国税务信息化建设概览

爱尔兰和英国都是全球电子政务发展水平处于领先地位的国家,其税务信息化的成功经验对于快速成长和发展中的中国税务信息化建设具有十分积极的借鉴意义。本文介绍了两国税务信息化建设的思路和实践情况,并围绕我国税务系统如何策略地运用信息技术手段,最大限度地把信息系统所蕴涵的可创造价值机会转变成税收管理的现实成果,全面推进税务管理的现代化建设,以及如何在信息化建设过程中转变建设理念,改变传统建设模式,提高信息化建设有效性等问题,提出了新的思路。     

对徇私舞弊不征、少征税款罪有关问题的解析

徇私舞弊不征、少征税款罪是我国税收征管领域最典型、最常见的渎职犯罪。该罪的主体仅限于税务机关的工作人员,徇私是主观动机,舞弊是客观行为表现。税务机关工作人员收受贿赂,违反规定对请托人不征、少征税款的,成立数罪,实行并罚。税务机关工作人员和纳税人(扣缴义务人)事先通谋,逃避税收征缴的,构成共同犯罪,其罪名依具体情况加以确定。     

Sharing corporate tax knowledge with external advisers

Tax knowledge is critical for companies to comply with tax laws and engage in tax planning and avoidance. Firms rely on external advisers in handling tax issues, however, sharing corporate tax knowledge with external advisers entails both opportunities and risks. We identify four relational factors that are associated with the decision of corporate taxpayers to share knowledge with external tax advisers. Survey data from 221 corporate taxpayers reveals a novel distinction between operational and strategic knowledge sharing. The operational dimension has a functional nature, whereas the strategic dimension has a more intentional character. Accessibility to, and a positive experience with, external advisers enables operational knowledge sharing. When firms perceive specific tax benefits in relation to sharing knowledge, they are more inclined to engage in operational knowledge sharing with external advisers but less prone to strategic knowledge sharing. Instead, strategic knowledge sharing is enhanced when firms have access to, and value the knowledge of their advisers, although this latter factor plays no significant role in explaining operational knowledge sharing. A positive experience with advisers also associates with strategic knowledge sharing. We link our results to other research and discuss implications for regulators considering, or requiring, firm disclosures of corporate tax strategy.     

Managing Oneself in Role: A Working Tool for the Management of Change

Changes in the nature of work and in organizational structures in the UK public sector have had a major impact on working roles and relationships. The authors explore whether a new approach to organizational role could help managers in HM Customs and Excise to meet the changing demands and challenges now facing them. A dynamic, rather than bureaucratic, view of role is required, which can support flexible working patterns and encourage innovation. Role should be seen as a method or 'working tool', rather than a prescribed set of behaviours, and being provisional, it is something to be worked with, rather than fixed and merely learned by rote. This conceptualization of role can contribute significantly to the implementation of change initiatives.     

Human Resource Management in the Voluntary Sector: Challenges and Opportunities

This article discusses issues facing personnel specialists within the voluntary sector who are trying to implement people management policies associated with the Human Resource Management (HRM) model. It outlines the pressures for change in management practice in the voluntary sector and then focuses more precisely on the definition of HRM theory, providing a rationale for voluntary agencies to develop policies and practices. The difficulties managers and personnel practitioners may face when attempting to implement these practices are described. Finally, an agenda for further research in this area is proposed.     

The HM ‘Treasure's Island’: The Application of Accruals-based Accounting Standards in the UK Government

Since the 1990s, UK has been progressively adopting a governmental accounting reform purporting to interpret and mimic accounting standards and practices from the private sector. Since 2009, the UK set of accounting standards applicable to the whole of governmental entities is based upon the HM Treasury's official interpretation of the international accounting standards initially designed for commercial enterprises, the latter standards having extensively inspired the International Public Sector Accounting Standards. This article analyses some representational concerns raised by its application of a balance sheet accounting approach to the public administration, pointing to consolidation perimeter, current value measurement of assets and liabilities and the case of public–private partnerships. This theoretical analysis develops relevant implications for representation and control of public spending and borrowing in UK and in general.     

Cost of capital and valuation in the public and private sectors: Tax,risk and debt capacity

Cost of capital and valuation differ in the private and public sectors, because taxes are a cost to the private sector but are only a transfer to the public sector. We show how to transform the after-tax private sector cost of capital into its pre-tax equivalent, for comparison with the public sector cost of capital. We establish the existence of a tax induced wedge between these two costs of capital. The wedge introduces a preference on the part of the private sector for assets with rapid tax depreciation, high debt capacity and low risk. We show that, in circumstances where an asset has identical public and private sector valuation in the absence of taxes, the tax induced difference in valuation is identical to the change in government tax receipts that results from having the asset owned by the private rather than the public sector. We provide some examples of distortions that result from failure to adjust for changes in tax revenues, and show how to effect such adjustment.     

Personal service companies and the public sector

Off-payroll workers in the UK, including personal service companies (PSCs), engaged by the public sector have been giving ‘assurance’ of their tax position to departments in the sector since 2012. Departments must be satisfied with the assurance. For PSCs this requires awareness of complex tax legislation (IR35), which is aimed at preventing tax avoidance. Costs may be incurred in attaining the necessary knowledge. This may bring into question costs incurred in protecting tax revenue. No similar obligation exists in the private sector.     

Does rising corporate social responsibility promote firm tax payments? New perspectives from a quantile approach

Studies of the linkage between CSR and firms' tax payment often use mean regression strategies and focus on developed economies. Using panel data from Vietnamese firms, this study finds that CSR has insignificant effects on firm tax payments when applying fixed-effect instrumental variable estimations. Using a quantile approach, however, this paper finds that CSR improves firm tax payment at a higher percentile but is negatively linked to enterprises with low tax payment, a result driven by several mechanisms. First, high adherence to CSR increases firms' compliance with the law. Also, although high adherence to CSR does not immediately promote transparency in the business environment, it does improve firm profitability and value added. This suggests that in the absence of effective institutions, firms can engage in the effort against tax avoidance and promote tax payment by applying CSR practices.     

Practitioners' perceptions of the importance of specific corporate tax knowledge of new hires working in tax

This study reports accounting practitioners' perceptions of the importance of new hires having certain tax knowledge normally addressed and developed in a corporate tax class. Variables related to the administration of a tax course are also examined.The results suggest that topics dealing with Subchapter S Corporations, determination of the corporate tax liability, and definition of the corporation are perceived as most important and should be covered in depth. Collapsible corporations and preferred stock bailouts are considered the least important topics.The survey results also are analyzed by firm size (large, medium, and small). Respondents from small firms place more importance on the accumulated earnings tax than the respondents from large firms. Respondents from large firms place more importance on reorganizations than respondents from medium or small firms.When asked about corporate tax course administration, respondents recommend the use of the Internal Revenue Code (IRC) and Regulations as a supplement to a standard textbook. They think it is important for any new hire to have at least one corporate tax course and be familiar with corporate tax forms. The only disagreement among the respondents from the different size firms is related to the number of courses students should complete. The respondents from the large firms indicate one course in corporate tax is not sufficient while the respondents from the medium and small firms indicate it is.The study also compares practitioners' recommendations concerning the amount of coverage for various corporate tax topics with the coverage of the topics in two corporate tax textbooks.These results have implications for accounting academicians who teach corporate tax. The results are useful in determining course coverage and in identifying topics that need additional attention as well as areas that need to be deemphasized or eliminated. The results also provide insight into the corporate tax course administration.     

论税收征收管理技术创新

在税收征收管理过程中,征税方和纳税方的信息不对称给税收征收管理带来一定负面影响。在减少信息不对称、实现税收优化目标的过程中,税收征收管理技术创新是重要手段之一,具有自身的特点和作用。为了进一步提高税收征收管理的水平,技术创新要着眼于税收征收成本和遵从成本的均衡、技术创新与传统人工的结合、政策主导和市场机制的协调等策略原则,采取必要的措施,提高税收征收管理的质量。     

Barriers to Trade and Imperfect Competition: The Choice of Commodity Tax Base

Recent work has started to analyze the choice of international commodity tax base under conditions of imperfect competition. This paper focuses on the effects of changing levels of trade barriers in a model where firms engage in duopoly competition and governments set commodity taxes non-cooperatively. It is shown that the consumption base (destination principle) dominates the production base (origin principle) when trade costs are high, but the ranking of the two tax bases is reversed for low levels of trade costs. We conclude that the case for origin-based commodity taxes becomes stronger when barriers to trade fall.     

Why Has the UK Corporation Tax Raised So Much Revenue?

We analyse a puzzle in the UK corporation tax: by both historic and international standards, corporation tax revenues have been high while the statutory rate has been reduced. We consider explanations based on changes in the tax law and in economic factors. Changes in the tax law, such as base‐broadening measures through reductions in capital allowances, can explain only part of the puzzle. Among the economic explanations, an increase in the size of the corporate sector, mainly caused by expansion of the service sector and improvements in profitability of the financial sector, seems the most likely. To the extent that higher profits, particularly financial sector profits, may have led to high revenues, there are doubts as to whether revenues will continue to be so strong.     

DEVOLVED BUDGETARY MANAGEMENT IN LOCAL GOVERNMENT: LESSONS FROM A SHIRE COUNTY

The changing environment of public sector organisations has, in recent years, focused attention on the management processes employed to achieve effective service delivery as economically and efficiently as possible. One approach has been the importation into the public sector ofa number ofprivate sector management strategies and practices, most notably those based on devolved bud- getary management principles. This paper analyses the approach of a large local authority to the implementation of devolved budgetary management, based, in large part, on interviews with line managers to whom budgets were devolved. It examines the process of devolution within the authority and the reactions of line managers to that process. It concludes that while the implementation of truly devolved budgetary management is an important, and perhaps essential, managerial technique in the 'new' local government environment, it should not be implemented in ways which ignore the differ- ences between public and private sector organisations and between different local authority departments.     

Financial leverage and corporate taxation: evidence from German corporate tax return data

To estimate the impact of profit taxation on the financial leverage of corporations, this study uses a pseudopanel constructed from comprehensive corporate tax return microdata for the period 1998–2001, which saw the introduction of major corporate tax reform in Germany. Financial leverage refers to the ratio of long-term debt to total capital. The endogeneity of the firm-specific marginal after-financing corporate income tax rate is controlled for by an instrumental variable approach. The instrument for the observed marginal tax rate is the counterfactual tax rate that a corporation would have faced in a particular period had there been no endogenous change, triggered by the tax reform, of its financial leverage and tax base. This counterfactual tax rate is derived from a detailed microsimulation model of the corporate sector, based on tax return microdata. The marginal tax rate has a statistically significant and relatively large positive effect on corporate leverage; for firms reporting positive profits, an increase of the marginal tax rate of 1 % would increase the financial leverage by approximately 0.7 %, on average. The debt ratio is less responsive to tax incentives for small corporations and firms facing high economic risks.     

Tax avoidance versus tax evasion: on some determinants of the shadow economy

In this paper we investigate how the possibility of (legal) tax avoidance affects the extent of (illegal) tax evasion and hence the shadow economy. We formulate a theoretical microeconomic model of household behavior in which households can participate in the official and in the shadow economy. Using comparative statics, we show that the complexity of the tax system affects participation in the shadow economy negatively, i.e. a more complex tax system with more possibilities of legal tax avoidance implies, ceteris paribus, a smaller labor supply in the shadow economy. In addition, we show that a reduction in the maximum admissible number of working hours in the official economy increases the labor supply in the shadow economy.