Using journal entries to teach partnership tax: An illustrative case

The use of journal entries to teach partnership taxation concepts provides students with a visual tool that liberates them from the memorization of formulas that has long been a staple in partnership tax education. Employing journal entries as our pedagogy, we present a case designed to be a comprehensive project for a stand-alone graduate partnership taxation course. We also provide guidance for how individual components within the case can be assigned, which could be particularly useful to instructors of business entity tax courses. Our case provides a resource that will assist instructors in teaching and students in understanding (1) the book accounting requirements, and (2) the interrelationship between the tax and book reporting requirements. Graduate tax students who completed this case in its entirety agree that the case meets its stated learning objectives, and that journal entries are an effective tool for analyzing partnership tax transactions and make learning partnership taxation easier.     

Federal income tax laws that cause individuals’ marginal and statutory tax rates to differ

This article presents a “phaseouts table” as a tax educational tool. The table compiles and summarizes the phaseouts of and limitations on deductions, credits, exclusions from income, and allowed contributions for individual U.S. federal income taxpayers in 2013. Phaseouts can cause individual taxpayers’ marginal tax rate (MTR) to be higher than their statutory tax rate (STR) (i.e., “bracket” based on taxable income). For each phaseout, the table includes how the phaseout works, the adjusted gross income (AGI) range for the phaseout, and the related formula to compute MTR, given STR. The table is appropriate for any course that covers either U.S. federal income taxation of individuals or tax planning. (The phaseouts table is updated annually and is available upon request from the author.) The remainder of the article is a teaching resource, explaining how to compute the specific impact on MTR of each of several example phaseouts. Together, the phaseouts table and article enable U.S. tax instructors to assist students in learning about phaseouts in an integrated, comprehensive manner.     

Tax competition, excludable public goods, and user charges

This paper provides an explanation for the increasing reliance on revenue from user charges on excludable public goods. We develop a model with many identical countries. The government of each country imposes a source-based tax on capital and supplies an excludable public good to heterogeneous households. Without tax competition, the price on the public good is zero. Tax competition induces each country to choose a positive price. The reliance on user charges turns out to be increasing in the intensity of tax competition measured by the number of countries. A coordinated decrease in user charges is shown to raise welfare in all countries.      

EVIDENCE ON THE ROLE OF TAXES ON FINANCING CHOICE: CONSIDERATION OF MANDATORILY REDEEMABLE PREFERRED STOCK

In this study we examine the effect of firms' marginal tax rates on incremental and overall reliance on mandatorily redeemable preferred stock (MRPS). Similarities in the cash flows associated with debt and MRPS, as well as similarities in the claims of holders of debt and MRPS on the assets of issuing firms, suggest that MRPS may be viewed as a substitute for debt. However, important differences in the tax treatment of MRPS and debt suggest that firms that cannot make full use of interest tax shields may be able to finance more efficiently using MRPS instead of debt. The results indicate that, both incrementally and overall, firms with low marginal tax rates rely more heavily on MRPS than debt relative to firms with high tax rates. This finding is consistent with the proposition that firms that cannot make full use of interest tax shields finance incrementally using equity rather than debt.     

Using student evaluation of teaching in administrative control: The validity problem

Many, if not most, business schools rely on student evaluation of teaching (SET) for at least one measure of teaching effectiveness. The accounting education literature seems not to have critically distinguished the purposes of SET, and at least one recent article (Hooper & Page, 1986) appears to accept the conclusion that these evaluations are both reliable and valid for use in administrative decisions (merit, tenure, and promotion). This article partially dissents from that position and examines the validity problems of these instruments as measured by the relationship between SET results and learning, which should be the most critical consideration. The relative ease with which SET are obtained, and their quantitative nature, result in a greater tendency to rely on them, often to the exclusion of other measures of teaching effectiveness. While SET can provide an input to managerial control decisions concerned with teaching effectiveness, undue reliance on them has the potential for serious dysfunctional effects.     

The effects of system design alternatives on the acquisition of tax knowledge from a computerized tax decision aid

Accounting firms are intensifying their reliance on experiential learning, and experience increasingly involves the use of computerized decision aids [Messier, W. (1995) Research in and development of audit decision aids. In R. H. Ashton & A. H. Ashton, Judgment and decision making in accounting and auditing (pp. 207–230). New York: Cambridge University Press]. Accountants are expected to learn from automated decision aid use, because the aids are not always available when dealing with the aid's topical matter, and the knowledge inherent in the aid is needed for competency on broader issues. To facilitate knowledge acquisition and explain the logic of the underlying processes, computerized decision aids provide the rationale for their calculations in the form of online explanations. We study how the location of explanations in a computerized decision aid affects learning from its use. Specifically, this research extends the existing literature by using a framework for the study of learning from decision aid use and by using cognitive load theory to explain the failure of certain decision aid design alternatives to promote learning. We define learning as the acquisition of problem-type schemata, and an experiment is performed in which cognitive load is manipulated by the placement of explanations in a computerized tax decision aid to determine its effect on schema acquisition. Schemata are general knowledge structures used for basic comprehension, and cognitive load refers to the burden placed on working memory when acquiring schemata. We find that increased cognitive load produced by the location of explanations in a decision aid leads to reduced schema acquisition. Our results indicate that when explanations in a computerized decision aid are integrated into its problem solving steps, cognitive load is reduced and users acquire more knowledge from aid use. This appears to be an important design consideration for accounting firms buying or building computerized decision aids.     

Sustainability and Accounting Education

Given the growing debate concerning the use of alternative presentation formats in corporate financial reporting, Volmer's recent paper in this journal is to be welcomed (June, 1992). Volmer conducts an experiment which compares students' perceptions of graphical and numerical presentations of financial information. From this he concludes that (i) graphical presentations improve the communication of financial information, and (ii) the integration of accounting research and teaching constitutes an effective alternative teaching method. We agree with the general message of Volmer's paper, and hope that subsequent studies will build on his exploratory work. This comment suggests a number of areas for future developments. These concern the literature base, experimental design, corporate practice and educational implications.     

Using dimensions of moral intensity to predict ethical decision-making in accounting

The paper addresses the persistent problem of graphical communication in financial reporting. The lack of appropriate curriculum development for students' professional guidelines may arguably perpetuate poor practice. The multifaceted perceptual issues, strategic use and design issues involved in this visual medium for financial reporting are discussed. There are decision-making processes involved in using graphical displays. The paper presents a comprehensive set of guidelines along with practical insights for the effective use of graphical displays. It may serve as a critical (self)learning tool.     

Concept Mapping in a Financial Accounting Theory Course

ABSTRACT

This paper assesses the usefulness of concept mapping (an educational learning, assessment, and curriculum development technique developed by Novak, widely used in the natural sciences) within an accounting education context. It shows how an accounting-based concept map can be constructed by students and educators to provide a visual, conceptually transparent graphical representation of an individual's understanding of a particular knowledge domain. The method is firmly routed in Ausubel's theory of meaningful learning and its emphasis upon the hierarchical structure of concepts is particularly relevant to accounting. While concept mapping has been used extensively in many (particularly science) disciplines, it has received relatively little attention within accounting education. The paper's contribution is to extend its application within an accounting education context by focusing upon how concept mapping can enhance students' learning by evaluating student-prepared concept maps, showing how concept mapping can be used at different levels within a course (i.e. curriculum, topic and activity) and reporting feedback of its use with two cohorts of students, within a financial accounting theory component. The use of educator-prepared concept maps, with concepts omitted, proved popular as tutorial quiz exercises and increased the quantity and quality of participation. However, students were less willing to construct their own concept maps and engage in meaningful learning. While most students were able to build upon aspects of their prior knowledge, stronger students used a greater range of concepts, a richer set of linkages and more examples than weaker students did. Concept maps were useful in diagnosing students' and instructors' misconceptions. Many students found concept mapping relatively easy to use, provided a better understanding of complex issues, liked the visual representation and holistic view, and so supported their learning. However, educators need to become proficient in constructing maps and using appropriate software, not make the maps too complex, provide students with some initial training in the technique and consider the fit between using the techniques as a learning tool and as an assessment tool. While no significant differences were found in the usefulness of the method for students of different ages and gender, Asian students generally found the method to be more useful than did UK students.     

Single-case technique for teaching the tax research process

This article describes an instructional technique using a single current tax case to demonstrate the many facets of tax research methodology. The technique is just one resource used for teaching the graduate tax research course, and provides for a richer contextual environment in which to learn the tax research process. Using a single case based on actual events, the many sources of statutory and judicial tax authority were incrementally evaluated to solve the tax problem, and integrally analysed for the final conclusions. In addition, the case centred on a very public and political tax issue, which generated increased interest among students and illustrated the political process associated with tax law development. Application of the technique for desired learning outcomes and assessment objectives are also discussed.     

Two-Rate Property Tax Effects on Land Development

Economists have long understood that the conventional property tax causes the housing stock to be smaller than it would be in the presence of a nondistortionary tax such as a land or site value tax. This article brings together the results from models of housing development timing and structural density with the results of a modern model of a graded property tax in an urban setting. The combination of results is used to investigate the effects of a communitys movement from a property tax to a two-rate tax system where land is taxed at a higher rate than structures. The conditions under which increasing reliance on a land or site value tax will increase housing structural density and speed of development are identified and examined. Policy implications are drawn.     

我国区域开发中的税收协调研究——层次界定与对策选择

税收对区域发展的作用体现在其对生产、流通以及消费的影响。税收与区域协调程度有三种层次,即静态均衡、均衡半耦合以及动态耦合,我国尚处于均衡半耦合或向动态耦合过渡的阶段。鉴于难以在短时间内实现全国性的改革突变,因此,将区域开发带与调整税收制度、政策相结合,从试点区域逐步向全国推进不失为良策。建议通过对税收与经济协调中面临问题的研究,以＂点—面＂方式探索我国在区域开发中的税收协调路径与政策选择,具体包括适度下放税收管理权限、积极推进税制改革、加强税收区域中心建设、调整纳税人＂成本—受益＂比例、避免对税收优惠政策的依赖等。     

新企业所得税法:八大制度创新

《中华人民共和国企业所得税法》(以下简称"新企业所得税法")不仅在形式上实现了法律的统一和税收法定原则,更在实质上实现了制度创新和完善。本文对新企业所得税法在纳税人、税率、应税所得、税收抵免、税收优惠、反避税、税收征管和信赖利益保护等八个方面的制度创新进行了理论分析和制度介绍,并对其可能产生的影响进行了具体分析。     

Compliance Costs of Corporate Income Taxation in Singapore

This study is the second in a series of studies investigating tax compliance costs incurred by public-listed companies. We found evidence of a size effect which is a predominant finding of similar studies. The size effect was more pronounced when absolute measures of costs were used than when a relative measure, cost/sales turnover, was used. Additional evidence was found of limited success relating to the IRAS's moves to simplify the tax system. Specifically, only large companies with sales turnover exceeding $500m benefited and considerably reduced their overall compliance costs. Most of the decrease was a result of the computational component of compliance costs. This resulted in the gap in absolute costs narrowing between Group 3 and any of the other categories of companies. There was also greater reliance on external professionals, the smaller the company. Views elicited indicate that more could be done to increase accessibility to IRAS publications for Group 1 and Group 2 companies.     

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.     

CAP Forum on E‐Business: E‐Commerce and Tax Planning: Canadian Experiences*

This paper explores the deployment of e‐commerce by Canadian firms in the global marketplace, with an emphasis on the implications of e‐commerce for tax planning. The business press and various government task forces have discussed challenges raised by e‐commerce for traditional “source‐based” tax systems; however, these discussions have presented little evidence of firms' reliance on e‐commerce for tax‐planning purposes. Similarly, academic research has seldom examined whether firms' decisions to implement e‐commerce are by tax‐planning considerations. It is thus largely unknown whether firms actively consider taxation issues when evaluating e‐commerce, how the factors that have been identified as influencing decisions to implement e‐commerce systems are balanced against tax‐planning considerations, and what barriers might exist in practice to using e‐commerce for tax planning. We choose a qualitative interview‐based approach to explore these issues. Our findings suggest that tax planning is not considered by most of our respondent companies in their decisions to deploy e‐commerce. The companies we interviewed tended to implement e‐commerce over several years, starting with back‐office technologies like enterprise resource planning (ERP) systems. Accordingly, the ability to perform online sales transactions, which is a key component of using e‐commerce for tax planning, often was not yet in place. One implication of these results is that if concerns over tax revenue losses are realistic, tax policymakers may have some time to refine tax legislation to address the challenges raised by e‐commerce.     

Developing essential skills through case study scenarios

Society expects university graduates to demonstrate skills in communication, interpersonal relations and self-management, creativity, decision-making, and problem solving. Experiential learning is more likely to achieve these desired learning outcomes than traditional teaching methods. To provide an experiential learning environment we developed case studies for taxation students to represent a typical client engagement. Students are required to identify and research taxation issues, provide written advice to their client, complete and file an application for a binding private ruling, and consult with the ‘IRD's Adjudication and Rulings Unit’ to negotiate the most favorable outcome for their client. Students' responses about their learning experience through the case studies indicate that the skills we attempt to develop are appropriate given the objectives of the course, and that the case study experience is effective in helping to develop those skills. Our case studies can be adapted for use in teaching taxation in the United States and other countries.     

Insiders’ perspectives of the effects of recent regulation on corporate taxation

Recent legislation and standard interpretations promulgated by governmental bodies and the Financial Accounting Standards Board (FASB) have attempted to address several issues related to corporate taxation. These issues include the lack of transparency regarding specific tax transactions, the difficulty in reconciling the corporate tax return with the corporate income statement, the relative lack of disclosure of tax contingencies in the financial statements, and the impact of internal control on the reliability of the corporate tax return. While the stated objectives of several recent regulations have included improvements in the areas of corporate tax compliance and transparency of financial statements, it is unclear whether these regulations have resulted in the desired effects. This study analyzes the perceptions of 223 corporate tax executives regarding the effects of Internal Revenue Announcement 2002-63, Schedule M-3 of IRS Form 1120, FASB Interpretation Number 48 (FIN 48), and Section 404 of the Sarbanes-Oxley Act. The findings indicate that the respondents perceive an overall increase in tax return transparency and corporate tax compliance as a result of Schedule M-3 and FIN 48; yet the ability of corporations to engage in tax planning has decreased as a result of FIN 48. The respondents also perceive that both FIN 48 and Section 404 of the Sarbanes-Oxley Act have increased their reliance on outside sources for tax compliance work.     

An attribution theory analysis of tax evasion related judgments

Traditional economic theory often has been utilized to explain tax evasion behavior. However, while economic consequences are important factors in the understanding of tax evasion behavior, they alone do not appear adequate to describe and predict the phenomenon [Lewis, The Psychology of Taxation (New York: St Martin's Press, 1982)]. This paper reports the results of two studies of tax evasion related judgments which builds upon tenants of attribution theory. Specifically, we examined the association between subjects' causal attributions for other's evasion behavior and their own behavioral intentions to evade. A significant association was found. The implications for tax evasion are discussed.     

Tax Systems in the World: An Empirical Investigation into the Importance of Tax Bases, Administration Costs, Scale and Political Regime

We study the structure of taxation in a sample of 100 democratic and nondemocratic regimes over three time periods. The results provide strong support for several regularities in the world as a whole, specifically (1) scale effect: utilization of each tax source increases as the government expands, (2) base effect: tax systems rely more heavily on relatively larger tax bases, and (3) administrative cost effect: lower costs of administration lead to increased reliance on the corresponding revenue source. We also investigate the role of political regime and find that democracies rely substantially more on other income taxation, possibly because this tax source requires a higher degree of voluntary compliance. JEL Code: H2, D72, D78, E31, E51, F13, P35