Tax fraud by firms and optimal auditing

Abstract Tax fraud is an issue of increasing importance in China. One particularly signi…cant fraud involves excessive claims for the rebate of VAT on exported goods. This fraud has two interesting features. First, it requires the collusion of an intermediary to supply the false documentation that supports a rebate application. Second, the punishment schedule is convex -with capital punishment used in major fraud cases. These features ensure that the payo¤ function of a …rm engaging in fraud is strictly concave in the level of fraud. This gives a well-de…ned optimization without the need to appeal to risk aversion. We show that the existence of fraud does not a¤ect the real output decision of the …rm nor the tax policy of the government. Audit resources can be used to detect …rms engaged in fraud as well as the intermediaries who supply false documents. Under reasonable assumptions it is shown that resources should be focused on detecting …rms and not intermediaries. Finally, if the government must take action on fraud a convex punishment scheme is shown to be optimal

Framework Proposal for a US Upstream Greenhouse Gas Tax with WTO-Compliant Border Adjustments

Discussions regarding policies to limit greenhouse gas (GHG) emissions have been ongoing for decades, and GHG policies of various types have been implemented for years in many countries. In practice, countries that adopt GHG policies utilize a portfolio that typically includes a mix of standards, subsidies, mandates and price-based policies, each directed at particular economic sectors. In view of obvious inefficiencies and lack of synergies resulting from the portfolio approach, economists and many others have convincingly argued that setting a price on carbon—and other GHG emissions—using an economy-wide, upstream GHG tax would be the most effective and efficient policy to address GHG emissions. Its effectiveness stems from being able to cover all emissions from production and use of fossil fuels by applying the tax on producers of coal, oil, and gas resources at the mine mouth and wellhead before they are combusted, rather than dealing with actual emissions from millions of individual sources and actors throughout the economy. Its efficiency stems from allowing markets, rather than the political process, to identify and implement the most cost-effective steps to reduce emissions through decisions that affect current operations and purchases, and through decisions now about investment, research and development to invent and deploy more effective solutions to reduce future GHG emissions. Myriad issues must be addressed to design and approve legislation to implement an upstream, economy-wide GHG tax. This report does not address that galaxy of challenges and opportunities. Rather, assuming that an upstream GHG tax could be implemented, the report addresses the challenge of border adjustments for exports and imports in the context of a domestic upstream GHG tax, as described below. The domestic GHG tax could cause energy-intensive industries to shift production to countries without comparable pricing, resulting in “leakage” of GHG emissions that the domestic tax aims to prevent. By shifting production from the United States, the tax would also disadvantage domestic manufacturers, their employees, and the communities where they operate. Hence, the call by many to introduce border adjustments: through the imposition of equivalent GHG pricing on imported products from energy-intensive, trade-exposed (EITE) industries, and by providing rebates from the impact of the upstream tax on the cost of products exported by domestic producers. However, doing this has raised concerns about consistency with rules of the World Trade Organization (WTO). Here we propose a Framework for a US climate policy with border adjustments that are compatible with US obligations under WTO agreements. It is based on an upstream tax on GHG emissions with rebates for exports and charges on imports for products from EITE industries. A companion Compendium (forthcoming) provides additional details on implementing border adjustments with specific recommendations for 35 EITE industries. Proposed border measures are designed in a non-discriminatory fashion, with the intent and effect of reducing global GHG emissions. Therefore, the border adjustments proposed as part of the Framework will not give rise to any valid claims of WTO violations. Even if such claims should be raised, a strong defense could be made under the exceptions to the WTO rules

Wine tax reform: The impact of introducing a volumetric excise tax for wine

In addition to the GST, alcohol sold in Australia is subject to excise tax. Although both beer and spirits are subject to a volumetric excise tax, wine is subject to an additional value added tax known as the Wine Equalisation Tax (WET). The recent Henry tax review recommended substantial changes to Australian alcohol taxation policy. Here, the implications for the wine industry of the Henry tax review recommendations are explored using a computable general equilibrium model. The results show that: (i) replacement of the WET with a revenue neutral volumetric excise tax would have a small negative impact on the wine industry; (ii) removal of the WET rebate would have a substantial negative impact on small wineries; and (iii) applying a uniform alcohol tax equal to the packaged beer excise rate across all alcoholic beverages would have a notable negative impact on the wine industry.wine, alcohol taxation, general equilibrium modelling, Demand and Price Analysis, Health Economics and Policy, R13, H23,

Fighting VAT fraud: the Bulgarian experience

This paper draws on the experience of Bulgaria in identifying the types and modus operandi of VAT frauds with a focus on the abuse of tax credit. It analyses the elements of tax design permissive of such abuses and discusses the possible solutions in the light of the international and domestic experience and the capacity of the tax dministration. It offers a critical analysis of the Bulgarian anti-fraud device the VAT account, as well as the various alternative policy and administrative measures proposed or applied as barriers to abuse of VAT credit, including those pertaining to the domain of commercial registration, or those related to indicative “market” prices of commercial transactions. The study concludes that the possible solutions should be sought along the lines of optimizing risk management and the principle of joint liability rather than through tighter controls at entry and on the conduct of business

A Clean Canada in a Dirty World: The Cost of Climate-Related Border Measures

As the federal government weighs policy options for reducing greenhouse gases, the question arises as to how to treat imported goods from countries with less stringent emission targets. One policy option is to impose a “carbon tariff” on imported goods from those countries.economic growth and innovation, carbon tarriff, greenhouse gas reduction, WTO

China’s Steel Industry and Its Impact on the United States: Issues for Congress

[Excerpt] The rise of China’s steel sector, along with other manufacturing industries, presents issues beyond trade law enforcement. China’s quest for industrial raw materials is having considerable effect on global demand and supply, and as a result, the prices and availability of such inputs. China’s restrictions on exports of some raw materials, allegedly, lower the cost of such raw materials in the home economy, while increasing global prices of these products (or diminishing global supply), thereby producing an unfair advantage in some manufacturing industries. Amid the rising trade cases against various Chinese steel imports, Congress became increasingly concerned over alleged unfair trade competition from China. In August 2010, legislative measures were introduced in the Senate (S. 3725), while a set of measures focusing on illegal import practices were proposed by the U.S. Commerce Department, both aiming to continue the rigorous and more effective enforcement of U.S. trade laws. This report provides an overview of China’s steel industry and discusses the issues and implications with regard to the U.S. steel sector

Productive Development Policies and Supporting Institutions in Latin America and The Caribbean

This paper examines the evolution of productive development policies in Latin America in the last half century, with an emphasis on the post-reform period. The paper begins with a review of the import-substitution era and goes on to describe and make a preliminary assessment of the meaning and implications of productive development policies in the liberalization period.

Strategic management, competitive advantage and the balanced scorecard in the New Zealand kiwifruit industry : a co-operative group case study : a thesis presented in partial fulfilment of the requirements for the degree of Master of Applied Science in Agribusiness at Massey University

Kiwifruit is New Zealand's biggest horticultural industry. The industry, which is lead by Zespri Group Limited, the statutory monopoly for the country's kiwifruit export, is the second most important producer of kiwifruit in the world. In a relative stable world kiwifruit industry, New Zealand has enjoyed buoyant returns in the last seasons. However, it is starting to feel the pressures for consolidation and globalisation, as well as other opportunities and threats. This situation is forcing kiwifruit service providers to plan strategically for the future and change. In this context, Satara Co-operative Group Limited came to life in June 2002, as one of the biggest post harvest operators in the industry, controlling 16.5% and 10% of kiwifruit and avocado volumes, respectively. However, although the hybrid cooperative started after a merger with a new strong corporate identity, it had neither a complete strategic analysis nor a written strategic plan to follow. Separately, a strategic management implementation tool called the Balanced Scorecard (BSC) has had worldwide acceptance and success in the last 10 years. In light of Satara's current strategic circumstances, the tool arises as a feasible and timely strategic solution for the organization. This research investigated whether Satara Co-op Ltd has a competitive advantage in the New Zealand kiwifruit industry through a complete strategic analysis. The research also studied whether the organization's competitive strategics could be implemented through the Balanced Scorecard framework. The research was based on the case study methodology that used extensive secondary data research, personal interviews and visits to relevant industry stakeholders, including: Zespri Group Ltd, Seeka Kiwifruit Industries, New Zealand Fruit Growers Federation, Aongatete Packhouses, Trevelyans Packhouses, and New Zealand Avocado Industry Council, amongst others, as well as in depth interviews to Satara Co-op Ltd executive and managerial positions. The case study data was analysed using pattern matching and explanation building. The results showed that it was not possible to conclude based on tangible data whether Satara Co-op Ltd had a competitive advantage. However, when available tangible data was added to intangibles and stakeholder's statements about the organization, along with the application of the SELECT framework, it was possible to determine that Satara's competitive advantage was based in its cooperative structure, scale and geographic diversity as well as its future diversification capabilities under different scenarios. The case study results also acknowledged that Satara Co-op Ltd strategies could be implemented through the Balanced Scorecard framework, as its strategies and available information allow the implementation of the framework building blocks, which are objectives, measures, targets and initiatives in four perspectives, namely financial, customer, internal processes and learning and growth. Satara strategies also match in various degrees the BSC extension framework, the strategy map, with its sub categories of revenue growth, productivity strategy, customer value proposition, internal businesses strategic themes and learning and growth drivers. This allowed the construction of a corporate strategy map, which was presented to the organization. Because the BSC and the organization's improvements due to the framework implementation could not be tested during the time allocated to this research, recommendations were drawn in respect to how the organization's competitive advantage and its competitive strategies will deliver to shareholders vision through the implementation of the corporate BSC presented and further score cards development at different levels in the organization. Keywords: strategic management, competitive advantage, cooperative, kiwifruit, avocado, packhouse, coolstore, Balanced Scorecard and strategy map

Fighting VAT Fraud: The Bulgarian Experience

This paper draws on the experience of Bulgaria in identifying the types and modus operandi of VAT frauds with a focus on the abuse of tax credit. It analyses the elements of tax design permissive of such abuses and discusses the possible solutions in the light of the international and domestic experience and the capacity of the tax dministration. It offers a critical analysis of the Bulgarian anti-fraud device the VAT account, as well as the various alternative policy and administrative measures proposed or applied as barriers to abuse of VAT credit, including those pertaining to the domain of commercial registration, or those related to indicative “market” prices of commercial transactions. The study concludes that the possible solutions should be sought along the lines of optimizing risk management and the principle of joint liability rather than through tighter controls at entry and on the conduct of business.VAT fraud VAT account