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November’14 Financial & Fiscal Features Newsletter

2014 Bank Stress Tests

The Asset Quality Review (Stress Test) results confirm system wide solvency. Yet, regulators announce the rewriting of bank risk models and the ECB plans large scale asset purchases.


Latest publications

Are tax cuts always necessarily good?

Tax cuts are pretty rare in the real world. When they do happen, they tend to be very partial, offering unjust advantages to a specific group. But even broader tax cuts can paradoxically do much harm. Using Italy as an example, this piece argues that when tax cuts lead to greater debt, they may ultimately curtail rather than enhance liberty – and long run economic growth?


Swede dreams

What happens when high tax rates drop
How do you pay for increased government spending on education, health care and social services? By lowering the tax rate, of course… Wait, what?! Oh indeed. A new report on Swedish fiscal developments over the last dozen or so years shows what’s possible to achieve when a country tries to shake off the reputation for Europe’s highest taxes.


“Water Tax”, the Ire of Ireland

It is becoming a pattern. Another weekend, another 100,000+ protest against a new tax. Only not Hungary and tax on the internet, but Ireland and “tax on water”. At least that’s how many media are reporting it. ABC runs with the headline "Marchers Protest Ireland’s New Tax on Water Supply", RT leads with “Ireland Stands Up Against Water Tax”. Protestors’ banners also cite water tax. IREF shows that what Ireland is actually doing is not introducing a water tax but increasing overall taxation. (...)


Taxing the internet – is Hungary leading the way?

8 myths busted
Large demonstrations took place over the weekend in Hungary. Somewhat unusually, people were not protesting against spending cuts, but against a new tax. A targeted tax on internet traffic. The issue of taxing this new paradigm of our lives will not go away anytime soon. As a companion to your on/offline debates, IREF busts 8 fiscal myths about the Internet.


Regulatory Role of One Jean Tirole

The new Nobel Memorial Laureate is one of prime architects of modern regulation of markets. To many that will make him a social engineer. However, as modern EU governments’ budgets are increasingly suffering from similar problems of failed previous regulation and self-regulation, his voice should increasingly be heard also in the European fiscal realm.


October ’14 Financial & Fiscal Features Newsletter

Special Issue on Scotland and Catalonia
Although Scotland voted in September to remain in the United Kingdom, both sides hailed the high voter turnout as recognition of democratic engagement and growing European dissatisfaction with over-centralised, bureaucratic, seemingly unaccountable government. The effect has been to raise morale in Catalonia and a handful of other potential breakaway regions. This is bad news for Europe’s (...)


Deutschland Wages Über Alles

Minimum wage is a tax on those who create jobs
Germany’s minimum wage has been created at a pretty high level, higher than its equivalents in the UK or the US. Increasing the price and reducing the quantity of an economic activity it acts as a tax. A pretty unsocial one as it destroys jobs for the poor and punishes those who create them. That the poorer Eastern Germany should be hit the hardest is saddest of all.


All aboard the fiscal board. Are you bored?

Should fiscal policy be taken away from governments?
When governments are unable to take care of their finances, is it time to appoint them a guardian who will take care of that business and (co-)determine fiscal policy? When is such guardian irreplaceable and how could they help?


New EU members banned from zero

Dawn of Zeroastrianism?
In 2006, the EU outlawed the zero, banning it from VAT rates of member states. Within two years the zero struck back. It now rules supreme in at least three economic areas, but in the tax domain it continues to be banned. Any newcomers to the EU will be hit especially hard. Why would anyone institute a minimum tax anyway? Surely we need protection from a maximum, not a minimum!


Fiscal assets and liabilities during a state divorce

With the Scottish referendum around the corner and other ones looming on the horizon, IREF investigates the accounts of states thinking about a divorce. What are assets and liabilities to be split? Is the currency such asset, for example?


September’14 Financial & Fiscal Features Newsletter

Low interest rates contribute to weak labour markets A new measure of Unemployment and Labour Market Conditions gains support at the Annual Jackson Hole Conference. Doubts continue about European QE as near-zero interest rates may actually be preventing employment from picking up. Concerns about Repo Market Disruptions The Repo market is becoming less attractive due to new Leverage Ratio rules. Doubts remain as to whether this can prevent reoccurrence of credit seizing up should (...)


Nobelist plays poker. For a pound.

Scotland’s coming referendum is offering the country “independence”. Politicians cannot agree about what exactly it would mean, especially what currency the new state would have. Now an economics Nobelist has added his voice to the debate. At face value the question of adopting another country’s currency is very simple, but closer scrutiny reveals deep fiscal connotations which complicate things. IREF disentangles the (...)


5 ways of responding to financial crisis

Most companies were hit hard by the freezing up of financial markets after 2008. Governments responded selectively – by selective tax cuts and subsidies, but they could have more meaningfully “help” everyone, not just big companies, by lowering corporate tax rates. Did they? IREF investigates, and shows EU countries’ responses fall into 5 categories.


Textbook guru: “Scrap corporate taxation!”

Why is anyone against it?
A famous economist, author of even more famous economics textbooks, is calling for an end to corporate taxation. Not because he has been bought by the corporate world and multinational companies, but because it makes economic sense. Perhaps most surprisingly – it should make sense even to left-leaning thinkers.


EU in bolshevik footsteps: the new GOELRO

A century later....
EU governments are increasingly subsidising electric plug-in cars. Many countries have “five year action plans” to electrify their roads, using tax money. Environmental benefits will actually decrease with e-car proliferation, and the governments are forcing us to pay for something we may soon not want.


Cumbersome German pension schemes: Pool them!

New IREF Policy Paper
A new IREF Policy Paper by Senior Fellow Alexander Fink analyses the colourful patchwork of various private pension schemes the government has created, and compares their inflexibility and other disadvantages to the US system. A “single pot” which would enjoy some of the currently individualized incentives would be a much better idea for everyone in Germany. And it may even contribute towards social (...)


For whom the toll bells

So who would build roads without taxes?
A century after privately built and operated roads were either nationalized or closed down, a new private toll road has sprung up in England. It is popular with drivers, if not with the local government. Is it always wrong to charge for use of infrastructure built from tax money? Is it OK that many EU countries start charging for highway mileage?


Naked truth about France

Government is blatantly nudist
Summer temperatures bring new wave of strikes to France (not that they’re seasonal…). Two concurrent current strikes involve nudity. Fiscally, though, they have very different implications. It does not depend on what you do with your clothes, it depends on who is your employer.


Caveat Venditor. Should governments compensate companies for embargos?

After many Occidental countries imposed sanctions on some Russian businesses, Russia has retaliated by restrictions on some Occidental ones. Trade wars rarely work. However, a new fiscal phenomenon has appeared: affected EU companies seek compensation from the state for loss of markets. Should they get it?


Silly season of silly taxes

The media world calls Summer “the silly season”. When politics takes summer break, it is time to roll out the “silly stories” to fill the media. Not this year. Politics strikes back and rolls out silly taxes on media. Hungary’s ruling party introduced a new tax on advertising revenues of up to 40%. This is terrible economics, but economics cannot compete with terrible hatred…


If you’ve won Wimbledon recently, read this.

Key to post-Wimbledon life? Lose the key!
Carrying keys on your person is dangerous if you are a Wimbledon champion, tax authorities will charge you heavily for such audacity. At least one EU government’s budget apparently relies on its citizens winning the Wimbledon. And it encourages envy. If successful sports-people representing their countries want to help their fellow citizens, they should stop being patriotic.


Governments should not be able to blame courts for their deficits

Portuguese Constitution is too PC
Portugal’s Constitutional court joined the ranks of those European courts that have halted crucial welfare reforms by governments. IREF reviews the evidence and concludes that fiscal policy must, for better or worse, remain the sovereign responsibility of the government held accountable at the next election. Being able to blame the courts would pave the way for governments to court misery, the opposite of what constitutions want to (...)


July’14 Financial and Fiscal Features Newsletter

BIS has doubts about monetary policy in the Euro area Latest BIS Report says that present monetary policies risk permanently destabilizing the global economy. It calls for A New Policy Compass, focussing on the ‘Financial Cycle’, not the Business Cycle. Banks remain fragile and imbalances persist The BIS notes that banks have been recapitalising, but in some countries problems with asset quality and earnings persist. The recent issue of a convertible bond for TESLA is a prime example of (...)


Strange property of property tax: an Irish tale

Desperate times call for desperate measures. European governments cannot raise enough tax to cover their spending. Ireland has even been forced to adopt what economists generally consider the least distortive tax feasible. That is good (considering the alternatives), but its execution leaves much to be desired. Strange incentives remain, and punishment for success is built (...)


New Book: Europe in an Age of Austerity

Two years ago, prof. Vani K. Borooah published a working paper for the IREF with the warning title "When the Lights Go Out". We are pleased to announce that the working paper has been since extended into a fully fledged book, now published by Palgrage Macmillan.


The Sol y Sombra of one sombre tax reform by los sombreros

Spanish government has just announced it will cut some taxes. The actual cut will not come until early next year, and just like a Spanish rodeo arenas, it has a sunny and a shady side to it. The sol is the riddance of tax breaks. The sombra, however, is ushered by the EU pressing for higher taxes.


The Invisible Tax Riseth

Stalin said: No man – no problem. EU governments’ tax policies are following suit. Shifting taxes onto a man who does not (yet) exist is one way of solving problems. Are governments also subtly changing existing taxes into less visible ones? Is this a more humane form of “No man protesting – no problem”? IREF investigates.


June ’14 Newsletter

Central Banking Confidence in the ECB wobbles as commentators on all sides question the effectiveness of supposedly growth stimulating new policies. Markets and Investment At least two big takeover deals are being negotiated in Europe now, both with heavy government involvement. The strategies adopted by the French and UK governments may appear to differ but at heart they are very (...)


Race to the bottom? What race?

Tax harmonisation in the EU is pursued in order to prevent competitive lowering of tax rates, an alleged race to the bottom. What race?, IREF asks. Taxes are an ever increasing (at best stable) portion of GDP, and have been for years.


28 Shades of Grey

Gross domestic product is getting more gross
Prostitution is going to enter official Italian GDP figures, allegedly to help the government meet its fiscal targets... The story went viral. IREF brings you the real story beyond the headlines. Prostitutes in GDP are perfectly normal, everywhere. It’s the way that we measure our governments’ indebtedness that is not normal...


Does turnout affect fiscal policy?

How economics - and the fiscal cycle - affect voter turnout is a richly studied question. But what about the other way? Can turnout - how many or few voters turn up to vote - affect the fiscal situation in the following period? IREF investigates and finds that people simply going and voting can be good for fiscal freedom. At least a little.


A New Ocean Discovered! - or just another subsidy?

Cypriot government has unilaterally “redefined” one of the conditions of its 10bn bailout package and lifted a ban on government officials traveling business class. Is this an exercise in customary opulent luxury or is it actually a hidden subsidy? And aren’t all governments guilty?


Geographic Distance from Brussels Matters

Voter turnout at the latest European Parliament election is much debated. Many countries saw further drops compared to last EP elections in 2009, fuelling concerns about widening democratic deficit. Beyond the general facade, IREF discovers an interesting geographic pattern in the turnout numbers.


What would be a “living wage” in the EU? The answer may surprise you.

The concept of Living wage is gaining popularity throughout the EU. The social pressure of its advocates probably stands behind the recent proposals to increase substantial minimum wages. Closer scrutiny of the proposed levels of living wages by the IREF reveals, however, that the relationship between Living wages and Minimum wages is quite unexpected.


Swiss referendum on minimum wage and the EU

LLL: Location, Largess and Lessons
If the Yes campaign wins today, Switzerland will have by far the biggest minimum wage on this planet. We analyse this trend in a wider context of contemporary European popular movements. We suggest that the Swiss Minimum wage proposition has actually very little to do with the traditional concept of "minimum wage". Lessons for the EU go much deeper than the standard effect of minimum wage on (...)


Wealth and growth: Mr. Piketty’s fallacious statistics

The misadventures of a new scientific materialism
In his new Capital in the 21st century, as forbidding as his previous work on High Wages in France in the 20th century, Thomas Piketty presents a mass of data on asset growth in several European countries and the United States. This information improves the knowledge of our society’s relationship to capital and the divide between the richest and the poorest. Except that the author abuses these data, following 19th century scientific materialism. Like Marxist authors, he endeavours to (...)


May’14 Newsletter: Three clear questions with unclear answers

Three fundamental questions have emerged, but clear answers still have not: Free floating for the hryvnia? New bureaucrats in Brussels? New rules for high-frequency trading?


Basic income is not so basic after all

Nobody likes poverty. But how do we end it? Suppose we give everyone some money. This will automatically include the poor, we don’t have to identify them, problem solved. Is it doable? Will anyone still work, create new ideas, write poetry, love? The answer depends largely on how basic the basic income is, as we show.


Woes of Wolf of Wallstreet

The latest Scorsese blockbuster is still making the headlines for its novel artistic work with timelines. Does the Wolf, however, have anything whatsoever to say about Wall Street? Very little, and it may actually work to strengthen and entrench any bad practices that remain in the financial world!


Are Members of European Parliament Smart or Dumb?

European elections are upon us. In a series of articles, IREF is helping to inform voters’ decision. Last week we analysed attendance rates by voters at elections and reasoned that European elections may be bad for democracy. It’s now time to turn the tables and consider attendance rates of parliamentarians at the EP. What does the record reveal about their attitude to work?



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The Case for Systemic Banking Reform


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Banque de France vs Bundesbank


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Taxation in Europe - Yearbook 2013


In the media

IREF In CBN News


IREF Bookseller: "Before It’s News"


"Why I Am Going To Leave France" in the Financial Post


"Why I Am Going To Leave France" in the Marginal Revolution


"Why I Am Going To Leave France" in the Telegraph