After the sunset: the residual effect of temporary legislation

The difference between permanent legislation and temporary legislation is the default rule of termination: permanent legislation governs perpetually, while temporary legislation governs for a limited time. Recent literature on legislative timing rules considers the effect of temporary legislation to stop at the moment of expiration. When the law expires, so does its regulatory effect. This article extends that literature by examining the effect of temporary legislation beyond its expiration. We show that in addition to affecting compliance behavior which depends on statutory enforcement, temporary legislation also affects compliance behavior which does not depend on statutory enforcement, and more generally, organizational behavior after a sunset. When temporary legislation expires therefore, it can continue to administer regulatory and other effects. We specify the conditions for this process and give the optimal legislative response

Internalisation Theory and outward direct investment by emerging market multinationals

The rise of multinational enterprises from emerging countries (EMNEs) poses an important test for theories of the multinational enterprise such as internalisation theory. It has been contended that new phenomena need new theory. This paper proposes that internalisation theory is appropriate to analyse EMNEs. This paper examines four approaches to EMNEs—international investment strategies, domestic market imperfections, international corporate networks and domestic institutions—and three case studies—Chinese outward FDI, Indian foreign acquisitions and investment in tax havens—to show the enduring relevance and predictive power of internalisation theory. This analysis encompasses many other approaches as special cases of internalisation theory. The use of internalisation theory to analyse EMNEs is to be commended, not only because of its theoretical inclusivity, but also because it has the ability to connect and to explain seemingly desperate phenomena

Income tax buyouts and income tax evasion

A tax buyout is a contract between tax authorities and a tax payer which reduces the marginal income tax rate in exchange for a lump-sum payment. While previous contributions have focussed on labour supply, we consider the interaction with tax evasion and show that a buyout can increase expected tax revenues. This will be the case if (1) the audit probability is constant and the penalty for evasion is a function of undeclared income or (2) the penalty depends on the amount of taxes evaded, and authorities use information about income generated by the decision about a tax buyout offer when setting audit probabilities. Since individuals will only utilise a tax buyout if they are better off, higher tax revenues imply that such contracts can be Pareto-improving