Local tax rebates,corporate tax burdens,and firm migration: Evidence from China

Conflicts of interest between local governments and the central administration in China have yielded many local policies that only serve the interests of local governments. The policy of first levying and then rebating taxes is an example of how local governments eschew the national tax regulations to boost local economies rather than national interests. In 2001, the Chinese government announced the termination of local tax rebates, which had some expected outcomes. We find that local governments complied with the new tax policy even though it no longer allowed local governments to grant tax incentives. However, some companies found ways to avoid the greater tax burdens by moving their business registration locations to tax havens. We also find that firms controlled by local governments were less likely to change registration locations. Our study examines the national tax regulation in China and explores how tax rules influence company decisions. In addition, we show that non-tax incentives, such as local economic development, may also influence company decisions.     

Altruism, incomplete markets, and tax reform

We compute the welfare effects of different revenue-neutral tax reforms that eliminate capital income taxation in two general equilibrium models calibrated to the U.S. economy. In our dynastic model, the reform with the largest welfare gain is the one that eliminates all income taxation and increases the consumption tax to 35%; 75% of the population alive at the time of the reform benefit from it. Individuals use intervivos transfers and bequests to redistribute the long-run benefits. In a pure life-cycle economy that lacks this redistribution technology, we find that the same reform would benefit only 9% of the population.     

Labor tax reform, unemployment, and search

A key obstacle to reducing payroll taxes in many industrialized and transition countries is the direct revenue loss to the government that it implies. This paper studies a simple and practical labor tax reform of reducing a payroll tax and increasing a progressive wage tax that keeps the marginal tax wedge unchanged. Such a strategy increases employment, reduces the equilibrium unemployment rate, and increases public revenue as long as workers do not have all the bargaining power in wage negotiations. Moreover, welfare rises if workers’ bargaining power is sufficiently large to exceed a critical value determined by the second-best Hosios condition.      

Family firms,tax avoidance,and socioemotional wealth: evidence from tax reform in Taiwan

Review of Quantitative Finance and Accounting - In 2018, Taiwan implemented a tax reform package that abolished the imputation regime, providing managers stronger incentive to engage in tax...     

Share values, inflation, and escalating tax rates

The interaction of inflation with a progressive tax system has been known to cause tax rates, and thus tax liabilities, to escalate with nominal income. Often blamed for having undesirable effects on investment and wealth, this feature of modern tax systems has not received formal treatment in the literature. The present study examines the impact of this inflation-related phenomenon upon the value of corporate equity within the framework of partial equilibrium. It is shown that the combination of moderate inflation and a mildly progressive rate structure may have a substantial adverse effect on share values, an effect sharply increasing with the firm's real growth rate. These results provide a partial explanation for the apparent conflict between the Fisherian hypothesis and the commonly observed inverse relationship between the rate of inflation and the deflated value of stock price indices. To the extent that occasional adjustment of tax schedules does not prevent taxpayers from being pushed toward higher tax brackets, these results suggest a sizable potential benefit from full indexation of tax rates in an economy suffering from chronic inflation. They also confirm the belief that failure to do so is expecially harmful to economic growth.     

Governance Matters III: Governance Indicators for 1996, 1998, 2000, and 2002

Six dimensions of governance are estimated covering 199 countriesand territories for four periods: 1996, 1998, 2000, and 2002.The indicators are based on several hundred individual variablesmeasuring perceptions of governance drawn from 25 data sourcesconstructed by 18 organizations. These individual measures areassigned to categories capturing key dimensions of governance.An unobserved-components model is used to construct six aggregategovernance indicators in each of the four periods. Point estimatesof the dimensions of governance are provided as well as themargins of errors for each country for the four periods. Methodologicalissues are also addressed, including tests for potential biases,and the interpretation and use of the data, given the estimatedmargins of errors for the indicators. The data and a Web-basedgraphical interface are available online at www.worldbank.org/wbi/governance/govdata2002/index.html.     

Corporate tax cuts,merger activity,and shareholder wealth

We study the impact of the Domestic Production Activities Deduction (DPAD) on mergers and acquisitions. DPAD reduces corporate tax rates on income from work or goods made in the U.S. Results indicate that the quantity and quality of acquisition bids by DPAD-advantaged firms conform to the predictions of the neoclassical theory of the firm and the theory of financial constraints. Specifically, bids, particularly those cash-financed, increase substantially in industries with large DPAD-related tax cuts and for firms with financial constraints. Moreover, DPAD improves acquisition quality where acquirers and targets are likely to generate incremental DPAD tax benefits through their merger.     

Inflation,tax rules and the stock market

This paper shows how the interaction of tax rules and expected inflation can decrease substantially the share price per dollar of pretax earnings. The current analysis extends my earlier study [Feldstein (1978)] by recognizing corporate debt, retained earnings, and the role of diverse shareholder investments. As before, the analysis separates household and institutional investors.     

Causes,benefits, and risks of business tax incentives

This paper provides an updated overview of tax incentives for business investment. It argues that tax competition is likely to be a major force driving countries’ tax reforms, and discusses tax incentives as a possible response to this. This is complemented by more detailed arguments for and against tax incentives, and by an illustrative analysis of different incentives using effective tax rates. Findings from the empirical literature on tax incentives are also presented. Based on the overview of theoretical and empirical findings, the paper then suggests a matrix of criteria to determine the usefulness of different tax incentives depending on a country’s circumstances.     

Overlapping tax revenue,soft budget,and rent seeking

This paper investigates how the soft-budget constraint with grants from the central government to local governments tends to internalize the vertical externality of local public investment by stimulating local expenditure when both the central and local governments impose taxes on the same economic activities financed by public investment. The model incorporates the local governments’ rent-seeking activities in a multi-government setting. The soft-budget constraint is welfare deteriorating because it stimulates rent-seeking activities, although a soft-budget game may attain the first-best level of public investment.     

行业差异、利益相关者治理机制与治理指数分析

有鉴于利益相关者的相关问题已成为现行公司治理框架中不可或缺的一部分,本文设置五个利益相关者治理评价指标,考察中国上市公司利益相关者参与公司治理和利益相关者权益的保护状况,并得出利益相关者治理指数.对上市公司利益相关者治理指数进行的行业分析表明:不同行业的上市公司和样本总体在利益相关者治理机制及其所涉及的五个具体方面均存在重要差异,这说明行业差异可能对上市公司利益相关者治理机制和治理水平存在重要的影响.     

公司会计治理与公司治理:同构、嵌入还是交叉?

公司会计治理通常被看作是公司治理的一部分,而且将公司会计治理看作是嵌入公司治理中或与公司治理同构。因此,以公司治理为导向的会计治理强调弥合公司治理中委托代理关系链务的缺陷及其对审计独立性的影响。本文从会计信息产权演变的角度将公司会计治理从公司治理中“解析”出来,认为公司治理与公司会计治理同源于委托代理难题,但治理的基础和目标不同,公司治理的监督机制与会计治理对监督机制的内在需求是不同的,因此,公司会计治理结构与公司治理结构应该是交叉的或大部分同构,同属于现代企业组织制度的范畴。本文主张应按照公司会计治理的逻辑结构及其与公司治理的关联性对其进行研究和建构。     

Endogenous choice on tax instruments in a tax competition model: unit tax versus ad valorem tax

This paper analyzes an endogenous choice problem with regard to tax instruments in a capital tax competition model. Using a symmetric and two-region model of tax competition, where each region is allowed to choose either a unit or an ad valorem tax, we show that selecting a unit tax as a policy instrument is the dominant strategy.     

Tax avoidance,tax management and corporate social responsibility

This study examines the effect of three measures of corporate social responsibility (CSR) — corporate governance, community and diversity on tax avoidance in firms that use auditor‐provided tax services. This is one of the first studies, to our knowledge, to empirically relate tax avoidance, tax management and CSR literature. By separating the strengths and concerns for each CSR measure, we are able to analyze the effects of a firm's negative and positive social actions on tax avoidance. We find that the interaction of community concerns with tax management fees positively affects both GAAP and Cash ETR, while the interaction of corporate governance strengths and diversity concerns with tax management fees negatively affects Cash ETR. Our results are similar when we use Excess ETR that is not explained by firm specifics. We find additional evidence that CSR affects tax avoidance when we divide firms into portfolios based on CSR levels. Our findings suggest that future studies on tax avoidance and tax management should incorporate CSR.     

Noise traders, excess volatility, and a securities transactions tax

Proponents of a securities transactions tax have suggested that such a tax may reduce stock return volatility. The argument is that, to the extent that short-term speculative trading volume is the source of excess volatility, a tax that reduces such volume will reduce volatility. In the context of a simple general equilibrium model, it is shown that this partial equilibrium argument is misleading and in large part incorrect. In the absence of a tax, the model generates equilibria in which the risky asset's price exhibits excess volatility and agents engage in excess trading activity owing to the presence of destabilizing noise traders. Within the context of the model, it is shown that, although a transactions tax can reduce the volatility of the risky asset's price, the reduction in price volatility is accompanied by a fall in the asset's price as agents discount the future tax liability associated with risky asset ownership. Consequently, although price volatility may decrease slightly, the fall in equilibrium prices more than compensates, and the volatiltiy of risky asset returns unambiguously increases with the level of the transactions tax.Board of Governors of the Federal Reserve SystemThe conclusions herein are those of the author and do not represent the views of the Federal Reserve Board or any of the Federal Reserve Banks.