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.     

Real Effects of Accounting Rules: Evidence from Multinational Firms’ Investment Location and Profit Repatriation Decisions

We analyze survey responses from nearly 600 tax executives to better understand corporate decisions about real investment location and profit repatriation. Our evidence indicates that avoiding financial accounting income tax expense is as important as avoiding cash income taxes when corporations decide where to locate operations and whether to repatriate foreign earnings. This result is important in light of the recent research about whether financial accounting affects investment and in light of the decades of research on foreign investment that examines the role of cash income taxes but heretofore has not investigated the importance of financial reporting effects. Our analysis suggests that financial reporting is an important factor to be considered in the policy debates focused on bringing investment to the United States.     

Organizing tax instruction: Evidence regarding how students organize tax knowledge

An important part of accounting curriculum reform is a movement away from traditional methods of organizing accounting courses toward improved organization schemes. Two basic approaches to organizing the content of tax courses are a transaction-based scheme and an entity-based scheme. This paper reports the results of an experiment that investigates which scheme is more consistent with how incoming masters in tax students organize tax knowledge and how different schemes affect the manner in which graduating students organize tax knowledge. Ninety students drawn from two full-time masters in taxation programs participated in the study. Subjects individually completed three separate tasks that measured how they organize tax knowledge at both the start of their degree program and three semesters later at or near the end of their program. The results for all three tasks indicate that incoming tax students organize tax knowledge around the type of transaction involved. The results for two of the three tasks indicate that the students' transaction focus did not change during their graduate tax program, whereas the results for the third task indicate that the students' transaction focus increased during their graduate tax experience. The implications of these findings for improving tax instruction are discussed.     

Currency Denomination of Intercompany Debt and Multinational Taxes

For multinational companies (MNCs) with foreign subsidiaries, the currency denomination of intercompany debt can have important effects on both taxes and financial statements. This paper analyzes the choice between an intercompany loan denominated in the home currency and one denominated in the subsidiary's functional currency. Using U.S. rules for financial accounting and taxes, the author demonstrates the expected impact of the loan's currency denomination on the expected level and variability of an MNCs overall taxes in the case where it has excess foreign tax credits.
The author's analysis shows that the foreign currency loan denomination leads to lower expected tax if the foreign withholding tax rate on interest is higher than the parent's home income tax rate. At the same time, the parent currency denomination leads to lower expected taxes if the parent's home income tax rate is higher than the foreign withholding tax rate on interest. Moreover, if an MNCs excess foreign tax credits are attributable to the subsidiary, the foreign currency loan denomination leads to lower variability in overall taxes. But in cases where the excess foreign tax credits arise from other foreign operations, the parent currency denomination leads to lower variability of overall tax.     

Destination taxation and evasion: Evidence from U.S. inter-state commodity flows

Tax evasion has been an important issue in the accounting literature for several decades, but the focus has been on corporate income taxes. We develop a new way to examine tax evasion that focuses on corporate transactions, rather than corporate profits. Specifically, we examine how commodity flows respond to destination sales taxes, allowing for tax evasion as a function of distance between trade partners. After accounting for transportation costs, we find that the effect of taxes decreases as distance increases. This is consistent with the notion that longer distances between trade partners hinder government oversight and increase the likelihood of successful tax evasion. Our results are robust with respect to outliers, strategic neighbor effects, information sharing agreements and other re-specifications. These results are important to policymakers because they evidence the difficulty of enforcing destination taxation in open economies such as U.S. states and the European Union.     

What do taxpayers prefer: Lower taxes or a better year-end position? A research note

What do people prefer, lower taxes or better year-end position? To our knowledge this is the first study that examines which component of individuals’ tax outcome, total tax or year-end position, drives their perceptions regarding their tax outcome as well as the legislation responsible. Based on prior economic and tax literature, especially borrowing from prospect theory and mental accounting, we predict that people are more likely to anchor on their prepayment position rather than on the total taxes in forming their perceptions about their tax position and their views on tax law changes. Based on a sample of 98 U.S. taxpayers we find that our predictions are supported. Specifically, we find that (1) people prefer a better year-end position than lower taxes; and (2) this preference is consistent regardless of whether they are in a refund or tax due position. Implications for public policy and accounting practitioners are also discussed.     

Out-West Products, Inc.: A financial modeling and decision analysis case

The Out-West Products, Inc. instructional case requires students to build a comprehensive financial model to support planning and decision-making. Part 1 of this team-oriented Excel project requires students to construct a baseline model, while Part 2 provides sensitivity analysis and decision-making extensions. The case incorporates cost-volume-profit, accounting income versus cash flow, and benchmarking analyses. Case objectives provide students with a realistic financial modeling experience that includes: building models; linking data across financial statements; testing solutions and analyzing scenarios; and improving critical thinking skills. These objectives closely align to the AICPA Core Competency Framework for Entry into the Accounting Profession. The case can be used in introductory and upper-division managerial accounting, upper-division cost accounting, and MBA managerial accounting courses, and can be modularized to achieve instructor-specific objectives.     

间接税亲贫性与代内归宿——穷人从减税中获益了吗?

税收工具作为财政扶贫机制中的重要一环,在推进精准扶贫、精准脱贫上发挥着重要作用。本文基于CFPS2012入户调查数据和中国2012年投入产出表,运用微观模拟方法测算出家庭的间接税负,在此基础上,借鉴衡量经济“涓滴效应”的亲贫增长指数,构建了识别和测度税制“亲贫性”的数量方法,评估间接税的减税政策能否自发惠及穷人,进一步测算家庭不同年龄层的间接税负代内归宿。结果显示:间接税整体上不具有“亲贫性”,其中增值税的“亲富性”最强,减税能让穷人比富人获益更多;儿童、成人以及老人均是间接税的负税人,贫困家庭抚养小孩而承担的间接税负比重高于非贫困家庭,赡养老人而负担的间接税负比重低于非贫困家庭。据此本文认为,继续推动大规模的间接税减税政策、采取差别化的增值税和消费税减免策略、逐步形成以直接税为主的税制结构,是改变间接税"亲富性"和强化税收扶贫职能的有效措施。     

An examination of ethical standards for tax issues

This study examines the extent to which educational background and demographic factors are associated with students' personal standards for ethical issues involving tax professionals. Two hundred and twenty-three students about to complete an introductory tax course were given ten brief scenarios focusing on the ethical and professional responsibilities of CPAs with tax practices. For each scenario, the students were asked whether they believed the opinion or the situation described was considered appropriate under existing professional standards, and whether they personally believed the opinion or situation described was appropriate. They were also asked whether they believed evading taxes was immoral. The results indicated that female students had higher personal ethical standards for issues involving tax professionals than did male students. Exposure to a course in auditing (the accounting course generally having the most extensive coverage of ethical issues) was associated with higher ethical standards, but exposure to a general course on ethics was not. Students aspiring to be tax professionals had higher ethical standards for issues involving tax professionals than those that did not, but their beliefs about the morality of tax evasion were not significantly different. The implications of these and other results are discussed.     

Why Capital Income Taxes Survive in Open Economies: The Role of Multinational Firms

This paper discusses the role of multinational firms and double taxation treaties for corporate income taxation in open economies. We show that it is optimal for a small open economy to levy positive corporate income taxes if multinational firms are taxed according to the full taxation after deduction system or the foreign tax credit system. Positive corporate taxes also occur in the asymmetric case where some countries apply the exemption system and others apply the tax credit system. If all countries apply the exemption system, the optimal corporate income tax is zero. We also show that, under tax competition, corporate income taxes are not necessarily too low from the perspective of the economy as a whole. While the undertaxation result is confirmed for the case of the exemption system, tax rates may also be inefficiently high if the deduction or the credit systems are applied.     

The value relevance of deferred tax attributed to asset revaluations

Our study focuses on the incremental value relevance of the balance sheet relative to the income statement approach to deferred tax accounting and whether such value relevance is attributable to firms being required to report the deferred tax consequences of asset revaluations. Our results suggest that the increment to deferred tax balances upon adopting the balance sheet approach has value relevance, with such value relevance driven by the deferred taxes on certain asset revaluations (specifically, property, plant and equipment, and equity-accounted investments). We interpret our results as reflecting investors’ preference for the balance sheet approach to deferred tax accounting and their view that deferred taxes on asset revaluations are real liabilities.     

Barbados Spirits Inc.

This case focuses on the audit of a subsidiary in Barbados of a Multi‐National Entity (“MNE”), a distiller in Toronto. The MNE is a large and important international client to the accounting firm. The firm provides both tax advisory and audit services to the MNE. The MNE, following advice of the accounting firm, has utilized an offshore related party to structure transactions that avoid taxes in Barbados. These related party transactions are a detriment to the interests of critical users of the financial statements, namely the minority shareholders and the tax authorities of Barbados. The auditor is now faced with evaluating the adequacy of the related party note disclosure and the completeness of the income tax provision. Independence issues of a self‐interest threat (importance of the client) and self‐review threat (evaluating the adequacy of the income tax provision based on tax advice provided by the firm) are explored.     

Tax policy and planning implications of hidden taxes: effective marginal tax rate exercises

Hidden taxes in the form of floors and phaseouts are prevalent in the current US tax system and can have a considerable impact on the marginal tax rate faced by the taxpayer. It is important that future tax professionals be familiar with the theoretical and practical implications of hidden taxes. This paper provides a series of classroom exercises to illustrate the impact that hidden taxes can have on marginal tax rates. Information for incorporating this material into an introductory tax course is also provided. The exercises help inform students about the impact of specific tax provisions on marginal tax rates and business and investment decisions, while also giving instructors an opportunity to discuss the tax policy considerations that lead to implementation of these provisions.     

Teaching management accounting in a competencies-based fashion

Traditionally, management accounting has been regarded as a monodisciplinary field of study that mainly focuses on calculating costs and prices. Today, it is seen that the field encompasses an ever-increasing number of knowledge domains including, for example, economics, sociology, psychology, and ethics. Modern-day management accountants have to be able to apply elements from all of these domains when solving concrete, real-life problems. The Open University of the Netherlands has therefore tried to construct a competencies-based management accounting curriculum that uses the well-known case method and integrates issues from various knowledge domains. In the curriculum, a unique problem-solving strategy is introduced that helps students to tackle as management accountants problems they may encounter during their studies, as well as the decision-making in their daily practice. This paper aims to give an overview of one of the courses in this curriculum, highlighting the use of the aforementioned problem-solving strategy.     

现行税会关系模式、企业税收差错及税会协调

本文采用2001～2004年的经验数据，分析了沪市公司的税收差错问题。发现我国上市公司税收差错涉及的家数众多、税种多元而且涉税金额巨大，对会计信息质量和国家税收资源及时入缴国库都带来了不利影响。因此，加强会计制度与税收法规的协作，减轻税收差错引致的会计信息失真，维护税收法规的尊严，已是当务之急。     

Towards an integrative tax course: a mutual funds case study

Students preparing for a career in professional accountancy need to be exposed to tax planning issues. In this paper we argue that the typical college tax course places too much emphasis on tax compliance rather than tax planning. Faculty can make their course into a more integrative experience by using case studies which concentrate on issues which are commonly faced by individual taxpayers but are seldom covered in today's tax courses. As a demonstration, an informational handout and a case study based on the investment and sale of mutual fund shares are provided.     

Making Deferred Taxes Relevant

Abstract

We analyse the conceptual problems in current accounting for deferred taxes and provide solutions derived from the literature in order to make International Financial Reporting Standards (IFRS) deferred tax numbers value-relevant. In our view, the empirical results concerning the value relevance of deferred taxes should find their way into the accounting standard-setting process. We conclude that deferred taxes should only be recognised for temporary differences that will result in real future tax payments and/or tax receipts. Temporary differences for which the tax cash flow has already occurred have valuation implications for the underlying asset or liability and should, therefore, be accounted for based on the valuation adjustment approach. Furthermore, we conclude that partial allocation should replace comprehensive allocation in order to better align deferred taxes with expected future cash flows and thus increase their relevance and understandability. Finally, we conclude that deferred tax balances should be measured on a discounted basis to address time value.     

住宅房地产税收的功能探析

住宅房地产在购销及保有环节涉及众多的税种,这些税种的税收功能存在突出差异。营业税具有突出的财政收入功能,但在收入调节方面有制度上的缺失;土地增值税具有鲜明的产业调控色彩,但征收办法的缺憾使其不能有效发挥作用;预期征收的房产税具有调节收入的功能,但在税制设计上存在征收制度和利益分配重构等制度困扰。建议针对相关税种的功能特点进行有针对性的制度改良,以促进我国住宅房地产业的健康发展。     

Learning by doing: a case study of qualitative accounting research

The increasing number of master's degrees in accounting as well as specialist MBA's mean that an understanding of research methods is now an important part of the toolkit of accounting educators. In the literature there has been an increasing interest in qualitative accounting research. Whilst this interest has been mirrored by an increase in qualitative methods textbooks, less is known about the experience of undertaking such research. This presents a problem for educators, as they need material for students to work with and analyse before they are able to design their own research projects. This paper presents a case study based upon an extensive piece of qualitative research concerned with the use of accounting information in decision-making processes in banking. Review, exploratory and application questions provide a framework through which the case study can be used as a learning resource for accounting educators, supervisors and students.     

Tax avoidance in family firms: Evidence from large private firms

Ownership structure plays an important role in firms’ decisions on tax avoidance. Recently, the effect of family ownership on corporate tax avoidance has become an issue of increasing interest among scholars from both the fields of family business research and tax research; however, empirical findings have so far remained ambiguous. Based on a unique sample of 678 large private firms from Germany, we show that for unlisted large firms (i) family firms avoid more tax than non-family firms, (ii) tax avoidance increases with the percentage of family ownership, and (iii) tax avoidance is a function of the number of shareholders. We interpret our results as evidence that benefits from avoiding taxes outweigh the non-tax costs in the case of large private family firms in Germany. Furthermore, as the number of family shareholders increases, family firms satisfy increasing demand for dividends by avoiding taxes.