This study tests the role of national culture in tax avoidance by multinational corporations (MNCs). Hofstede’s four cultural dimensions are used to measure cultural differences across countries: uncertainty avoidance, individualism, masculinity, and power distance. The level of tax avoidance is estimated based on the worldwide effective tax rate (ETR) of corporate groups. A sample of group years domiciled in 31 countries for the years 2008 to 2015 is used to test the association between culture and tax avoidance. The empirical results of the study imply that MNCs headquartered in countries with low uncertainty avoidance, low individualism, high masculinity, and low power distance engage in a higher level of tax avoidance than MNCs in countries with high uncertainty avoidance, high individualism, low masculinity, and high power distance. In addition, the cultural features of the parent company generally have a stronger influence on group-level tax avoidance than those of its subsidiaries. This study contributes to the literature by presenting empirical evidence of culture as a determinant of tax avoidance by MNCs. The study also suggests that policymakers consider cultural factors when setting anti-avoidance regulations for MNCs.
{"title":"Nontax Country Characteristics and Tax Avoidance","authors":"J. Yoo, Y. Lee","doi":"10.2139/ssrn.3292703","DOIUrl":"https://doi.org/10.2139/ssrn.3292703","url":null,"abstract":"This study tests the role of national culture in tax avoidance by multinational corporations (MNCs). Hofstede’s four cultural dimensions are used to measure cultural differences across countries: uncertainty avoidance, individualism, masculinity, and power distance. The level of tax avoidance is estimated based on the worldwide effective tax rate (ETR) of corporate groups. A sample of group years domiciled in 31 countries for the years 2008 to 2015 is used to test the association between culture and tax avoidance. The empirical results of the study imply that MNCs headquartered in countries with low uncertainty avoidance, low individualism, high masculinity, and low power distance engage in a higher level of tax avoidance than MNCs in countries with high uncertainty avoidance, high individualism, low masculinity, and high power distance. In addition, the cultural features of the parent company generally have a stronger influence on group-level tax avoidance than those of its subsidiaries. This study contributes to the literature by presenting empirical evidence of culture as a determinant of tax avoidance by MNCs. The study also suggests that policymakers consider cultural factors when setting anti-avoidance regulations for MNCs.","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"105 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-11-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124707159","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper analyzes issues about the attribute which have any economy to resettle the dysfunctions and the weaknesses, which come from structural economic problems of the public administration and the activities of the private section. The currency rate is the stabilizing factor of any economy, as will be shown to that scientific thesis. Then, this reasoning index that for the purposes of this work would be used paradigms from real countries’ cases and a theoretical analysis and therefore logical deductions. In other words, this work indicates that the secure economies are the economic immune system of these economic systems. These paper, finally, provides the two mainstream solutions for these economic conditions.
{"title":"Selfcure Economies and the E.U. Economy (Bonded Economies)","authors":"Constantinos Challoumis Κωνσταντίνος Χαλλουμής","doi":"10.2139/ssrn.3290231","DOIUrl":"https://doi.org/10.2139/ssrn.3290231","url":null,"abstract":"This paper analyzes issues about the attribute which have any economy to resettle the dysfunctions and the weaknesses, which come from structural economic problems of the public administration and the activities of the private section. The currency rate is the stabilizing factor of any economy, as will be shown to that scientific thesis. Then, this reasoning index that for the purposes of this work would be used paradigms from real countries’ cases and a theoretical analysis and therefore logical deductions. In other words, this work indicates that the secure economies are the economic immune system of these economic systems. These paper, finally, provides the two mainstream solutions for these economic conditions.","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"40 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-11-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117226154","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Given the boom in, and media attention surrounding, Initial Coin Offerings (ICOs), this Commentary asks whether this new type of financing is one that fills a market gap in the financial sector, or is just a way of defrauding unsuspecting retail investors looking to invest in new startups. We set forth arguments showing that ICOs do indeed fill an essential gap in funding for entrepreneurs that have limited access to other forms of startup financing such as crowdfunding, venture capital or bank lending. We point out that for an ICO to be the efficient way of financing, the business venture needs to develop: i. a decentralized platform, usually based on blockchain technology; where ii. a coin gives digital access to the platform; and serves as iii. a means of payment for users that engage in decentralized, person-to-person (P2P) exchange in order to create and transfer value between them. If these features are fulfilled, using an ICO can be integral to the project’s success, and we label it simply a “fundamental ICO.” Based on such guidance, and very much in the spirit of “activity-based regulation,” we suggest that Canadian securities regulators develop specific regulations for ICOs that move beyond the question of whether an ICO is a security or not and take into account the special nature of such financing. Alternatively, or until new rules arrive, regulatory relief could still be granted for fundamental ICOs under the Canadian Securities Administrators (CSA) Sandbox. Our proposed test can also create guidelines for the right approach to taxation that is consistent with the value that is added by such financing. Tax rules can be based on the dual roles of the coins, which are both an investment stake and a currency. There is value in bringing together economic, regulatory and legal aspects to develop a specific framework for the regulation and taxation of ICOs in Canada. This can ensure an environment that reaps the benefits of the ongoing blockchain revolution for the Canadian economy without exposing investors unnecessarily to fraud.
{"title":"Tales from the Crypt - How to Regulate Initial Coin Offerings","authors":"Thorsten V. Koeppl, Jeremy M. Kronick","doi":"10.2139/ssrn.3288778","DOIUrl":"https://doi.org/10.2139/ssrn.3288778","url":null,"abstract":"Given the boom in, and media attention surrounding, Initial Coin Offerings (ICOs), this Commentary asks whether this new type of financing is one that fills a market gap in the financial sector, or is just a way of defrauding unsuspecting retail investors looking to invest in new startups. We set forth arguments showing that ICOs do indeed fill an essential gap in funding for entrepreneurs that have limited access to other forms of startup financing such as crowdfunding, venture capital or bank lending. We point out that for an ICO to be the efficient way of financing, the business venture needs to develop: i. a decentralized platform, usually based on blockchain technology; where ii. a coin gives digital access to the platform; and serves as iii. a means of payment for users that engage in decentralized, person-to-person (P2P) exchange in order to create and transfer value between them. If these features are fulfilled, using an ICO can be integral to the project’s success, and we label it simply a “fundamental ICO.” Based on such guidance, and very much in the spirit of “activity-based regulation,” we suggest that Canadian securities regulators develop specific regulations for ICOs that move beyond the question of whether an ICO is a security or not and take into account the special nature of such financing. Alternatively, or until new rules arrive, regulatory relief could still be granted for fundamental ICOs under the Canadian Securities Administrators (CSA) Sandbox. Our proposed test can also create guidelines for the right approach to taxation that is consistent with the value that is added by such financing. Tax rules can be based on the dual roles of the coins, which are both an investment stake and a currency. There is value in bringing together economic, regulatory and legal aspects to develop a specific framework for the regulation and taxation of ICOs in Canada. This can ensure an environment that reaps the benefits of the ongoing blockchain revolution for the Canadian economy without exposing investors unnecessarily to fraud.","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"30 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-11-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133035341","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We quantify the size of a fire-sale externality in the derivatives market in the absence of a macroprudential buffer on top of microprudential initial margin requirements. We show how this varies over the financial cycle with market volatility. We then assess the ability of a macroprudential buffer to reduce this externality. We find this depends critically on the release conditions of the buffer. A buffer could reduce or, if set appropriately, even eliminate the externality, as long as it was released when investors faced any significant collateral calls, regardless of whether these related to variation or initial margins. However, it could be harmful if it was released only with calls for additional initial margin. Predicated on ideal release conditions, we test the performance of macroprudential buffers based on ‘anti-procyclicality’ mechanisms in current regulations. These mechanisms can reduce the fire-sale externality in some market conditions, but not all. Conceptually, we devise alternative mechanismsthat eliminate the externality, although it may be difficult for policymakers to specify these in practice. Finally, as an alternative to quantity-based solutions, we investigate the ability of taxes to reduce the externality. We find that such a price-based solution could also eliminate the externality if set appropriately, but this would require a high tax rate and the redistribution of significant tax revenues.
{"title":"Macroprudential Margins: A New Countercyclical Tool?","authors":"Cian O'Neill, Nicholas Vause","doi":"10.2139/ssrn.3284418","DOIUrl":"https://doi.org/10.2139/ssrn.3284418","url":null,"abstract":"We quantify the size of a fire-sale externality in the derivatives market in the absence of a macroprudential buffer on top of microprudential initial margin requirements. We show how this varies over the financial cycle with market volatility. We then assess the ability of a macroprudential buffer to reduce this externality. We find this depends critically on the release conditions of the buffer. A buffer could reduce or, if set appropriately, even eliminate the externality, as long as it was released when investors faced any significant collateral calls, regardless of whether these related to variation or initial margins. However, it could be harmful if it was released only with calls for additional initial margin. Predicated on ideal release conditions, we test the performance of macroprudential buffers based on ‘anti-procyclicality’ mechanisms in current regulations. These mechanisms can reduce the fire-sale externality in some market conditions, but not all. Conceptually, we devise alternative mechanismsthat eliminate the externality, although it may be difficult for policymakers to specify these in practice. Finally, as an alternative to quantity-based solutions, we investigate the ability of taxes to reduce the externality. We find that such a price-based solution could also eliminate the externality if set appropriately, but this would require a high tax rate and the redistribution of significant tax revenues.","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-11-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133473717","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The Pension Benefit Guaranty Corporation (PBGC) multiemployer pension insurance program faces projected insolvency, driven by systemic underfunding of multiemployer pension plans. To address this brewing crisis, Congress has established a joint select committee to develop multiemployer pension reforms. Primary causes of the crisis include lax funding rules and inaccurate valuations of pension assets and liabilities. Explanations frequently offered for underfunding, such as financial market downturns and the declining proportion of active workers, fail to account for the relative weakness of multiemployer pension finances. Reforms should establish accurate asset and liability measurements, safeguards against further deterioration of underfunded plans, improved incentives for plan trustees, stronger funding requirements, and risk-based premiums. Legislators may wish to consider authorizing the PBGC to relieve plans of so-called orphan liabilities, subject to strict requirements that any relief must reduce projected claims on pension insurance. Lawmakers must be firm in declaring that no taxpayer funds will be used to bail out multiemployer pensions.
{"title":"Averting the Multiemployer Pension Solvency Crisis","authors":"Charles P. Blahous","doi":"10.2139/ssrn.3381914","DOIUrl":"https://doi.org/10.2139/ssrn.3381914","url":null,"abstract":"The Pension Benefit Guaranty Corporation (PBGC) multiemployer pension insurance program faces projected insolvency, driven by systemic underfunding of multiemployer pension plans. To address this brewing crisis, Congress has established a joint select committee to develop multiemployer pension reforms. Primary causes of the crisis include lax funding rules and inaccurate valuations of pension assets and liabilities. Explanations frequently offered for underfunding, such as financial market downturns and the declining proportion of active workers, fail to account for the relative weakness of multiemployer pension finances. Reforms should establish accurate asset and liability measurements, safeguards against further deterioration of underfunded plans, improved incentives for plan trustees, stronger funding requirements, and risk-based premiums. Legislators may wish to consider authorizing the PBGC to relieve plans of so-called orphan liabilities, subject to strict requirements that any relief must reduce projected claims on pension insurance. Lawmakers must be firm in declaring that no taxpayer funds will be used to bail out multiemployer pensions.","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"25 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-10-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116910636","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Petersburg, Virginia, prospered over two centuries as a center of production and trade. However, the city experienced economic difficulties beginning in the 1980s as a large number of layoffs at production plants in the area coincided with an erosion of retail trade in the city. Prolonged economic decline followed. In contrast, somewhat similar shocks in other moderate-sized cities in Virginia were followed by gradual economic recovery. We examine these differing outcomes and offer an explanation that hinges on the proximity of Petersburg to its larger neighbor, the greater Richmond area. We find evidence suggesting that after the job declines, higher-skilled residents in Petersburg initially commuted to jobs nearer to Richmond, later relocating from Petersburg toward Richmond--an option not readily available in the other Virginia cities considered. We suggest that, as a result, Petersburg suffered a sharp decline in tax revenues and that municipal costs could not be proportionately scaled down, leading to severe fiscal stress.
{"title":"Distance and Decline: The Case of Petersburg, Virginia","authors":"R. Owens, Santiago M. Pinto","doi":"10.21144/WP18-16","DOIUrl":"https://doi.org/10.21144/WP18-16","url":null,"abstract":"Petersburg, Virginia, prospered over two centuries as a center of production and trade. However, the city experienced economic difficulties beginning in the 1980s as a large number of layoffs at production plants in the area coincided with an erosion of retail trade in the city. Prolonged economic decline followed. In contrast, somewhat similar shocks in other moderate-sized cities in Virginia were followed by gradual economic recovery. We examine these differing outcomes and offer an explanation that hinges on the proximity of Petersburg to its larger neighbor, the greater Richmond area. We find evidence suggesting that after the job declines, higher-skilled residents in Petersburg initially commuted to jobs nearer to Richmond, later relocating from Petersburg toward Richmond--an option not readily available in the other Virginia cities considered. We suggest that, as a result, Petersburg suffered a sharp decline in tax revenues and that municipal costs could not be proportionately scaled down, leading to severe fiscal stress.","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"57 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-10-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124153848","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
With Canada ending the legal prohibition of recreational marijuana as of October 17, 2018, governments across the country have been mobilizing to tackle the many policy challenges. But there has been a lack of policy discussion on whether supply from existing authorized producers will be sufficient to meet expected demand. This Commentary contributes to the literature by estimating the size of the marijuana black market during the first year of legalization, October 2018 – September 2019. These estimates take into account legal-illegal price differences as well as the gap between market demand and available legal supply. Our results show that both pricing and supply shortages will contribute to maintaining the black market, resulting in lost tax revenues and a continued need to spend significant resources on law enforcement activities related to the market. Our projections indicate the size of the black market, including legal supply shortages, will be about 380 tonnes, or at least $2.5 billion during the first year of legalization. This further suggests that forgone government revenues based on the coordinated excise tax framework and GST/HST/QST could be about $800 million. This loss can be attributed to a shifting mix of black market activity and legal market supply shortages, depending on the legal price and availability of supply. Using midpoint estimates for demand, our supply projections indicate that at $9 per gram, 87 percent of the resulting tax loss would be attributed to the black market and the remaining 13 percent to supply shortage in the legal market. There are various options that Canadian governments could employ to reduce this potential loss. Provinces should ensure regulations facilitate a competitive and convenient legal retail market. The federal government should focus on ensuring that it does not impede production more than is necessary to protect public health so there will be enough legal marijuana to supply these retail outlets. In addition, the federal government and Health Canada should develop regulations for edible and concentrated marijuana products. These products are already available on the black market, providing it a significant competitive advantage since they will not be part of the legal regime, at least at first. While our results predict initial shortages in legal supply, the market should be able to adjust as time goes on; Consumers' Interests and Protection;Provincial Taxation and Budgets; Health Policy; Provincial Comparisons
{"title":"Cannabis Countdown: Estimating the Size of Illegal Markets and Lost Tax Revenue Post-Legalization","authors":"Anindya Sen, Rosalie Wyonch","doi":"10.2139/ssrn.3269989","DOIUrl":"https://doi.org/10.2139/ssrn.3269989","url":null,"abstract":"With Canada ending the legal prohibition of recreational marijuana as of October 17, 2018, governments across the country have been mobilizing to tackle the many policy challenges. But there has been a lack of policy discussion on whether supply from existing authorized producers will be sufficient to meet expected demand. This Commentary contributes to the literature by estimating the size of the marijuana black market during the first year of legalization, October 2018 – September 2019. These estimates take into account legal-illegal price differences as well as the gap between market demand and available legal supply. Our results show that both pricing and supply shortages will contribute to maintaining the black market, resulting in lost tax revenues and a continued need to spend significant resources on law enforcement activities related to the market. Our projections indicate the size of the black market, including legal supply shortages, will be about 380 tonnes, or at least $2.5 billion during the first year of legalization. This further suggests that forgone government revenues based on the coordinated excise tax framework and GST/HST/QST could be about $800 million. This loss can be attributed to a shifting mix of black market activity and legal market supply shortages, depending on the legal price and availability of supply. Using midpoint estimates for demand, our supply projections indicate that at $9 per gram, 87 percent of the resulting tax loss would be attributed to the black market and the remaining 13 percent to supply shortage in the legal market. There are various options that Canadian governments could employ to reduce this potential loss. Provinces should ensure regulations facilitate a competitive and convenient legal retail market. The federal government should focus on ensuring that it does not impede production more than is necessary to protect public health so there will be enough legal marijuana to supply these retail outlets. In addition, the federal government and Health Canada should develop regulations for edible and concentrated marijuana products. These products are already available on the black market, providing it a significant competitive advantage since they will not be part of the legal regime, at least at first. While our results predict initial shortages in legal supply, the market should be able to adjust as time goes on; Consumers' Interests and Protection;Provincial Taxation and Budgets; Health Policy; Provincial Comparisons","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"45 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116703161","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We provide a cross-country evidence on the impact of corporate and personal income taxes, and corporate governance systems on debt maturity structures and leverage using a comprehensive sample of 212,642 firm-year observations based on a sample of 19,573 firms from 24 OECD countries over the period 1990–2015. We find longer debt maturities, higher leverage, and, in a dynamic setting, a greater propensity to decrease short-term debt, in countries with high investor protection and where the potentials for debt tax shields and after-tax return of investors are high. Our results imply that when investors are protected, firms tend to have optimal debt maturities to maximise the gains from tax shields and minimise the tax cost of equity. In contrast, in low protection countries, investors prefer their firms to opt for low debt that is mainly short-term to mitigate the risk-shifting and debt overhang problems even if this entails forgoing the debt tax shields. Our results hold for various robustness checks including the hierarchical linear model specification, which corrects for a number of OLS biases.
{"title":"Taxes, Governance, and Debt Maturity Structure: International Evidence","authors":"Eilnaz Kashefi Pour, M. Lasfer","doi":"10.2139/ssrn.3262779","DOIUrl":"https://doi.org/10.2139/ssrn.3262779","url":null,"abstract":"We provide a cross-country evidence on the impact of corporate and personal income taxes, and corporate governance systems on debt maturity structures and leverage using a comprehensive sample of 212,642 firm-year observations based on a sample of 19,573 firms from 24 OECD countries over the period 1990–2015. We find longer debt maturities, higher leverage, and, in a dynamic setting, a greater propensity to decrease short-term debt, in countries with high investor protection and where the potentials for debt tax shields and after-tax return of investors are high. Our results imply that when investors are protected, firms tend to have optimal debt maturities to maximise the gains from tax shields and minimise the tax cost of equity. In contrast, in low protection countries, investors prefer their firms to opt for low debt that is mainly short-term to mitigate the risk-shifting and debt overhang problems even if this entails forgoing the debt tax shields. Our results hold for various robustness checks including the hierarchical linear model specification, which corrects for a number of OLS biases.","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"23 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-10-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121804486","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This report deals with the analysis of data used by tax officers to support their claim of tax fraud at a pizzeria. The possibilities of embezzlement under study are overreporting of take-away sales and underreporting of cash payments. Several modelling approaches are explored, ranging from simple well-known methods to presumably more precise tools. More specifically, we contrast common methods based on normal assumptions and models based on Gamma-assumptions. For the latter, both maximum likelihood and Bayesian approaches are covered. Several criteria for the choice of method in practice are discussed, among them, how easy the method is to understand, justify and communicate to the parties. Some dilemmas present itself: the choice of statistical method, its role in building the evidence, the choice of risk factor, the application of legal principles like “clear and convincing evidence” and “beyond reasonable doubt”. The insights gained may be useful for both tax officers and defenders of the taxpayer, as well as for expert witnesses.
{"title":"Sample Statistics as Convincing Evidence: A Tax Fraud Case","authors":"J. Lillestøl","doi":"10.2139/ssrn.3272185","DOIUrl":"https://doi.org/10.2139/ssrn.3272185","url":null,"abstract":"This report deals with the analysis of data used by tax officers to support their claim of tax fraud at a pizzeria. The possibilities of embezzlement under study are overreporting of take-away sales and underreporting of cash payments. Several modelling approaches are explored, ranging from simple well-known methods to presumably more precise tools. More specifically, we contrast common methods based on normal assumptions and models based on Gamma-assumptions. For the latter, both maximum likelihood and Bayesian approaches are covered. Several criteria for the choice of method in practice are discussed, among them, how easy the method is to understand, justify and communicate to the parties. Some dilemmas present itself: the choice of statistical method, its role in building the evidence, the choice of risk factor, the application of legal principles like “clear and convincing evidence” and “beyond reasonable doubt”. The insights gained may be useful for both tax officers and defenders of the taxpayer, as well as for expert witnesses.","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-09-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127212866","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Canada has had a fiscal equalization system since 1957, and equalization was formally embedded in the constitution in 1982. However, the rationale for equalization, how the concept is defined and applied, and what its effects are or should be are all issues that continue to be vigorously debated in both political and expert circles. This article reviews some of these issues and concludes that, on the whole, equalization has played a useful role in helping Canada to get through the last half-century as well as it has. However, the system could be improved by making it more transparent--for example, by fixing the amount to be distributed at (say) the present share of the federal budget (instead of indexing it to a moving average of nominal growth in the gross domestic product), and making the distributional formula less overtly political by establishing a quasi-independent board to examine the allocation formula from time to time and make ecommendations for change. Governments at both the federal and provincial levels would then be more accountable for their actions, as they should be in a democracy.
{"title":"Policy Forum: Equalization and Canada's Fiscal Constitution — The Tie That Binds?","authors":"R. Bird","doi":"10.2139/ssrn.3262830","DOIUrl":"https://doi.org/10.2139/ssrn.3262830","url":null,"abstract":"Canada has had a fiscal equalization system since 1957, and equalization was formally embedded in the constitution in 1982. However, the rationale for equalization, how the concept is defined and applied, and what its effects are or should be are all issues that continue to be vigorously debated in both political and expert circles. This article reviews some of these issues and concludes that, on the whole, equalization has played a useful role in helping Canada to get through the last half-century as well as it has. However, the system could be improved by making it more transparent--for example, by fixing the amount to be distributed at (say) the present share of the federal budget (instead of indexing it to a moving average of nominal growth in the gross domestic product), and making the distributional formula less overtly political by establishing a quasi-independent board to examine the allocation formula from time to time and make ecommendations for change. Governments at both the federal and provincial levels would then be more accountable for their actions, as they should be in a democracy.","PeriodicalId":431495,"journal":{"name":"Public Economics: Taxation","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-09-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130306279","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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