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Monday, April 27, 2020 | History

2 edition of Corrective taxation versus liability found in the catalog.

Corrective taxation versus liability

Steven Shavell

Corrective taxation versus liability

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  • 30 Currently reading

Published by Harvard Law School in Cambridge, MA .
Written in English


Edition Notes

StatementSteven Shavell
SeriesDiscussion paper -- no. 671, Discussion paper (John M. Olin Center for Law, Economics, and Business : Online) -- no. 671.
ContributionsJohn M. Olin Center for Law, Economics, and Business
Classifications
LC ClassificationsK487.E3
The Physical Object
FormatElectronic resource
ID Numbers
Open LibraryOL24417248M
LC Control Number2010655615


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Corrective taxation versus liability by Steven Shavell Download PDF EPUB FB2

Corrective Taxation versus Liability as a Solution to the Problem of Harmful Externalities. Although the corrective tax has long been viewed by economists as a desirable remedy for the problem of harmful externalities, its actual use has been limited, mainly to the domain of by: 7.

Abstract. Taxation and liability are compared here as means of controlling harmful externalities. It is emphasized that liability has an advantage over taxation: inefficiency of incentives arises under taxation when, as would be typical, it would be impractical for a tax to reflect all variables that significantly affect expected harm, Cited by: Corrective Taxation versus Liability S culty is that the expected harm would frequently be difficult for the tax authority to estimate because itusuallydepends on a ected harm associated with the use of a crane, for example, would be hard to gauge.

Taxation and liability are compared as means of controlling harmful externalities, with a view toward explaining why the use of liability predominates over taxation. Taxation suffers from a disadvantage in the analysis: because taxes do not reflect all the variables affecting expected harm, inefficiency results, whereas efficiency under liability requires only assessment of actual harm.

Although the corrective tax has long been viewed by economists as a desirable remedy for the problem of harmful externalities, its actual use has been limited, mainly to the domain of pollution.

Liability, in contrast, has great importance in controlling harmful externalities. The idea of using liability as a means to control externalities traces back to Calabresi () and was recently compared to corrective taxation in Shavell ().

3 On the one hand, regulation (i Author: Steven Shavell. versus the liability-related problem of diluted incentives to exercise precautions and to mod-erate levels of activity due to escape from suit.

Under optimal joint use of taxes and liability, liability is again employed to the full extent, and the tax equals only the fraction of expected harm that is unaccounted for by liability. Corrective Taxation versus Liability Steven Shavell Online Appendix This appendix contains the proof of the part of Proposition 4 that is not shown in the text, namely, under the optimal joint tax and liability regime, the optimal tax t**.

Definition of Book Depreciation Book depreciation is the amount recorded in the company's general ledger accounts and reported on the company's financial statements. This depreciation is based on the matching principle of accounting. It is emphasized that liability has an advantage over taxation: inefficiency of incentives arises under taxation when, as would Corrective taxation versus liability book typical, it would be impractical for a tax to reflect all variables that significantly affect expected harm, whereas efficiency of incentives under liability does not require the state to determine expected harm - it requires only that injurers pay for harm that occurs.

The Corrective Tax versus Liability As Solutions to the Problem of Harmful Externalities. Although the corrective tax has long been viewed by economists as a theoretically desirable remedy for the problem of harmful externalities, its actual use has been limited, mainly to the domain of : Steven Shavell.

Deferred tax assets and liabilities are financial items on a company’s balance sheet. Deferred tax assets and liabilities exist because the income on the tax return is different than income in the accounting records (income per book).

Here are some transactions that generate deferred tax asset and liability balances. Warranties/5(6). Get this from a library.

Corrective taxation versus liability. [Steven Shavell; National Bureau of Corrective taxation versus liability book Research.] -- Taxation and liability are compared here as means of controlling harmful externalities.

It is emphasized that liability has an advantage over taxation: inefficiency of. The optimal joint use of taxation and liability is also examined, and it is shown in the model that is analyzed that liability should be employed fully because liability creates more efficient incentives than taxation; a tax should be used only to take up the slack due to.

NBER Program(s):Law and Economics, Public Economics. Although the corrective tax has long been viewed by economists as a theoretically desirable remedy for the problem of harmful externalities, its actual use has been limited, mainly to the domain of pollution.

Liability, in contrast, has great importance in controlling harmful by: 4. Get this from a library. The corrective tax versus liability as solutions to the problem of harmful externalities. [Steven Shavell; National Bureau of Economic Research.] -- Although the corrective tax has long been viewed by economists as a theoretically desirable remedy for the problem of harmful externalities, its actual use has been limited, mainly to the domain of.

The difference between tax-adjusted basis versus book-adjusted basis frequently comes into play with regard to depreciation. Depreciation is a method of accounting for the reduction of an asset's. Book to Tax Terms: Book Accounting: Accounting used on a company’s audited financial statements.

Balance Sheets (assets, liabilities and equity) and income statements should be reported using U.S. GAAP. Tax Accounting: Income and deductions reported on tax return in accordance with the rules in the I.R.C. and attending regulations.

Although the corrective tax has long been viewed by economists as a theoretically desirable remedy for the problem of harmful externalities, its actual use has been limited, mainly to the domain of pollution. Liability, in contrast, has great importance in controlling harmful by: 4.

Tax Payable vs. Deferred Income Tax Liability. As an investor, you should know that most companies keep two sets of books, but not for any nefarious reasons. One set reflects the requirements of.

A temporary difference, however, creates a more complex effect on a company’s accounting. If a temporary difference causes pre-tax book income to be higher than actual taxable income, then a deferred tax liability is created. This is because the company has now earned more revenue in its book than it has recorded on its tax returns.

The. Although the corrective tax has long been viewed by economists as a theoretically desirable remedy for the problem of harmful externalities, its actual use has been limited, mainly to the domain of pollution. Liability, in contrast, has great importance in controlling harmful externalities.

The primary benefit of a corrective tax is the provision of an incentive for companies to reduce activities such as pollution by creating cleaner, greener technology. Corrective taxes can be more efficient at reducing pollution than regulation.

The book "Principles of Economics" by N. Gregory Mankiw explains and exemplifies this. Deferred Tax Liability: A deferred tax liability is an account on a company's balance sheet that is a result of temporary differences between the company's accounting and tax carrying values, the Author: Julia Kagan.

A liability is a a legally binding obligation payable to another entity. Liabilities are a component of the accounting equation, where liabilities plus equity equals the assets appearing on an organization's balance sheet. Examples of liabilities are: For all of these sample liabilities, a company records a credit balance in a liability account.

The difference of $24, represents the cost of the option. For income tax purposes, BC recognizes the entire option cost of $24, as a deduction in X2. The balance in the asset and liability accounts is now zero, and, assuming no further hedging transactions at X2, BC reverses the X1 deferred tax.

Corrective Taxation versus Liability as a Solution to the Problem of Harmful Externalities. Authors. Steven M. Shavell Follow. Start Page. S Recommended Citation. Shavell, Steven M. () "Corrective Taxation versus Liability as a Solution to the Problem of Harmful Externalities," Journal of Law and Economics: Vol.

54 Cited by: 7. Book-tax differences are usually covered in the second undergraduate tax course or in a graduate tax course, with primary emphasis on how to report such differences on Schedule M-1 or M-3, not on how to determine the deferred tax benefit or liability. Originating book/tax differences resulting in deferred income taxes now being measured at 21% vs.

35% (including the effects of tax gross-ups). Important note: Reversing book/tax differences should not be impacted by tax reform unless the reversal period for non-protected book/tax differences is Size: KB. Because of tax and accounting rules the first year your company has shown more tax but paid the lesser tax that means it has created deferred tax liability in its book for year 1.

Deferred tax liability in year 1 = = $6,; The following journal entry must be passed in year 1 to recognize the deferred tax. A Pigovian tax (also spelled Pigouvian tax) is a tax on any market activity that generates negative externalities (costs not included in the market price).

The tax is intended to correct an undesirable or inefficient market outcome (a market failure), and does so by being set equal to the social cost of the negative externalities. Social cost include private cost and external cost.

BUSINESS TAXATION Semester III STUDY TEXT This text book is developed for Executive Diploma in Business and Accounting of Business School, CA Sri Lanka.

No part of this text book reproduction, distribution, utilization or Depending on the business entity, types of compliance and tax liability will be Size: 1MB. Deferred tax liabilities are defined by this Standard as “the amounts of income taxes payable in future periods in respect of taxable temporary differences”.

The temporary differences are the differences between the carrying amount of an asset and liability and its tax base. Tax base is the value of an asset or liability for the tax. Steven M. Shavell Books 5. Polinsky, Corrective Taxation versus Liability (American Economic Review,Vol.

) Clarifying the Role of Legal Rules and the Income Tax in Redistributing Income (Journal of Legal Studies, Vol Number 2, Junepages ). The Congressional Budget and Impoundment Control Act of defines tax expenditures as “revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability.”.

The gross corrective distribution amounts and taxable amounts are both reported on Form R to assist in reporting on a participant’s personal income tax return. Participants should contact their tax advisor to ensure that corrective distributions, including earnings or losses thereon, are properly reported on their personal income tax return.

Income Tax. Capital Gains Tax Example. Joe Taxpayer earned $35, in He pays 10% on the first $9, income and 12% on the income that comes after that. His total tax liability. Reconciling Corporation Book and Tax Net Income, Tax Years between the two methods.

If the deferred portion is positive a deferred tax liability is created, representing the amount of taxes not paid on financial statement income this period because of temporary differences reducing tax net income below book income.

Such isFile Size: KB. Top 5 Tax Accounting Differences Between GAAP and IFRS of the underlying item that gives rise to the deferred tax asset or liability.

For example, a non-deductible reserve item that is. Tax Geek Tuesday: Allocation of Partnership Liabilities. the partnership secured by a liability to an amount equal to the excess of the liability over the tax basis of the property at the time Author: Tony Nitti.

When dealing with lease agreements care should be taken to determine whether the agreement refers to a finance lease or an operating lease for tax purposes.

For income tax purposes, the lease payments of both a finance lease and an operating lease are deductible under section 11(a). The underlying asset is therefore not capitalised for [ ].Prior to tax reform, the rules governing the income taxation of trusts and estates were considered complex and intimidating by many.

While the same holds true after the enactment of the Tax Cuts and Jobs Act (TCJA), the income tax landscape has shifted due to the various changes under the TCJA. This increased the importance of understanding the interplay between taxable income and trust.United States:???

= recognize as "deferred tax liability" Tax expense is based on the pre-tax GAAP income. Deferred taxes arise because tax expense ≠ taxes currently owed Income tax expense = Current tax expense + Deferred tax expense (NI) (Taxes payable) (Deferred Tax Liability) Deferred tax expense = Timing difference x statutory tax rate.