Taxes and Financial Reporting: Evidence from Discretionary Investment Write-Offs in Italy

This paper provides further empirical evidence on the relationship between taxes and financial reporting by focusing on accounting decisions to write-offs equity investments. The analysis is based on panel data for Italian companies. In the period 1998-2006 the Italian corporate income tax has been reformed several times. In particular the tax deductibility of write-offs of equity investment was repealed in 2004. The paper exploits the ensuing high cross-sectional and times series variation in the marginal tax rate to identify tax effects. The econometric analysis delivers strong evidence that taxes affect the probability of write-offs. In contrast there is no evidence that taxes affect the magnitude of the write-offs. The paper also tests for the existence of a trade-off between tax minimization and non tax costs such as financial reporting costs and agency costs. Surprisingly, the evidence of such trade-off is rather weak.corporate taxation, write-offs of equity investments, financial reporting, tax planning

Taxation Policy in EMU - Julian Alworth and Giampaolo Arachi

This paper proposes to examine whether and how the introduction of the euro changed the impact of taxes on the economy or influenced the direction of tax policy. The paper surveys potential theoretical channels through which tax policy and exchange rate regimes are interrelated (capital mobility, strategic tax setting and trade policy). It is difficult to find strong empirical evidence of major, unique changes in the impact or determination of tax policy following the introduction of the euro owing. The internal market has had by far a greater impact and it has affected all European Union countries. Nevertheless, we highlight that going forward certain specific aspects deserve attention. The most important concerns the use of tax policy by individual EMU countries to improve competitiveness by changing the mix of taxes and thereby achieving an internal devaluation.  A second issue deserving attention concerns tax competition particularly in the area of corporation tax. We provide some tentative evidence that capital movements to and from euro area countries have become more responsive to the levels of corporate taxation.  Alworth, Arachi, EMU, corporate taxation, value-added tax, trade, VAT

Taxes and financial reporting: Evidence from discretionary investment write-offs in Italy

This paper provides further empirical evidence on the relationship between taxes and financial reporting by focusing on accounting decisions to write-offs equity investments. The analysis is based on panel data for Italian companies. In the period 1998-2006 the Italian corporate income tax has been reformed several times. In particular the tax deductibility of write-offs of equity investment was repealed in 2004. The paper exploits the ensuing high cross-sectional and times series variation in the marginal tax rate to identify tax effects. The econometric analysis delivers strong evidence that taxes affect the probability of write-offs. In contrast there is no evidence that taxes affect the magnitude of the write-offs. The paper also tests for the existence of a trade-off between tax minimization and non tax costs such as financial reporting costs and agency costs. Surprisingly, the evidence of such trade-off is rather weak

Pathological remodelling of the athlete’s heart

Engaging in regular physical activity affords significant health benefits, while a lack of exercise is associated with increased cardiovascular morbidity and mortality. The amount of physical activity required to achieve these benefits is relatively modest, equating to 20–30 minutes of moderate intensity exercise per day. Most athletes far exceed these recommendations and now perform athletic feats previously considered insurmountable. Studies in veteran athletes have demonstrated favourable outcomes such as reduced incidence of cardiac disease and a greater lifespan. However, in asymptomatic athletes concealing underlying cardiac disease, intense exercise may be associated with sudden cardiac death. Despite the devastating and highly visible effects of life-threatening arrhythmias, exercise has retained its reputation as a prolonger of life as it is not the primary cause of death but merely a trigger for such catastrophes. More recent studies, however, have suggested that the effects of regular intense exercise may result in adverse remodelling in otherwise healthy hearts. This article will explore this concept and whether chronic intensive exercise can adversely impact cardiovascular health

Fiscal Reforms during Fiscal Consolidation: The Case of Italy

In this paper we aim to discuss the strengths and weaknesses of the fiscal consolidation package adopted recently by the Italian Government in order to achieve a balanced budget by 2013. Revenues are forecasted to increase by more than 3.3 GDP percentage points; these stem mostly from indirect and property taxation. The analysis of the Italian case is interesting since it seems to be consistent with a recent strand of the literature which, in order to foster both short and long-term economic growth, advocated a shift of the tax burden from capital and labour income to consumption and property. Through a set of micro simulation models, this paper evaluates the effects of the Italian fiscal package on households and firms. We show that, in respect of households’ income, indirect and property tax reforms are highly regressive, whilst the reform makes limited resources available for growth enhancing policies (reduction in the effective corporate tax burden). Then, we propose an alternative fiscal package. We show that a less regressive reform on households can be obtained by shifting taxation from personal and corporate income tax to indirect taxation. Our proposal allows the tax burden on firms to be reduced substantially and, in the meantime, offers lower personal income tax rates on households in the lowest deciles of income distribution since they are penalized most by the increase in indirect taxation.tax reforms, fiscal consolidation, micro simulation models, Italy

Fiscal Reforms during Fiscal Consolidation: The Case of Italy

In this paper we aim to discuss the strengths and weaknesses of the fiscal consolidation package adopted recently by the Italian Government in order to achieve a balanced budget by 2013. Revenues are forecasted to increase by more than 3.3 GDP percentage points; these stem mostly from indirect and property taxation. The analysis of the Italian case is interesting since it seems to be consistent with a recent strand of the literature which, in order to foster both short and long-term economic growth, advocated a shift of the tax burden from capital and labour income to consumption and property. Through a set of micro simulation models, this paper evaluates the effects of the Italian fiscal package on households and firms. We show that, in respect of households’ income, indirect and property tax reforms are highly regressive, whilst the reform makes limited resources available for growth enhancing policies (reduction in the effective corporate tax burden). Then, we propose an alternative fiscal package. We show that a less regressive reform on households can be obtained by shifting taxation from personal and corporate income tax to indirect taxation. Our proposal allows the tax burden on firms to be reduced substantially and, in the meantime, offers lower personal income tax rates on households in the lowest deciles of income distribution since they are penalized most by the increase in indirect taxation.Tax reforms, Fiscal consolidation, Micro simulation models, Italy