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.
According to the latest statistics, the economic growth in the United Kingdom has reached 3% (annual rate) in the last quarter of 2013. This is the highest rate since 2007. For comparison, the French growth was 0.3% yoy (2013).
A company is mismanaged when some indicators are in the red such as factory costs higher than those of its competitors; highly unprofitable activities; general and administrative costs much higher than those of its competitors; too many employees in too many locations; outstanding wages and incredible social benefits; various waste; assets sold at low prices and no return on investment; lack of reaction to badly needed reforms.
If the Banque de France’s 2012 financial statements are compared to those of the Bundesbank (German Central Bank), it can be argued that the Banque de France is very poorly managed.
It is the stunning figure revealed by Jean-Philippe’s Delsol in his book “Why I Am Going To Leave France”, an IREF bestseller.
Between the public sector (5.2 millions), the parapublic sector (2 millions), those who are granted the public allowance called “Active Solidarity Revenue” (1.3 millions) and those who are granted direct or indirect public allowances (6 millions), the total amount of the French people receiving public money is superior to those working in the private sector!
A short presentation of IREF ‘Yearbook on Taxation in Europe’ Series
Among the many ways to understand the climate of opinion and the culture of a country, looking at its fiscal system is one of the most rewarding. Sure, fiscal systems almost always rhyme with complexity; each system bearing the weight of its history. But the attempts to change the system, to give it a new direction, are highly instructive.
General assessment
2012 was rather good fiscal year for Bulgaria – while the economy is still underperforming, tax revenues almost fully recovered to their pre-crisis (2008) record high levels and the budget position was close to balanced, with deficit being far less than 1% for 2012. There were no big moves in tax policy, except for the introduction of 10% tax on interest payments from bank deposits – thus widening the base of the flat tax.
2013 already proved to be a challenging year for Bulgaria, with protests throughout the country and a caretaker government being appointed by the president. The social unrest in Bulgaria was fundamentally driven by the depressed labour market and the high electricity bills in the winter. While there are serious challenges ahead and a political uncertainty prior to the elections, one should note that there is no “fiscal fire” in Bulgaria. There are of course long term fiscal challenges – pressure of social systems (pensions, health), low fiscal reserve, the quality of public spending – but there are no immediate pitfalls that should be addressed in an urgent manner.
From the accounting viewpoint, the Czech government is relatively efficient in taming deficits. The chosen strategy for the whole period 2010–2014 is to raise approximately one extra Czech koruna in taxes for every two korunas saved from previously planned expenditures. On the other hand, the latest Convergence Program update reveals that over the period 2013–2015 only 43% of discretionary measures will be carried out on the expenditure side of the budget. It seems that further expenditure cuts will be increasingly difficult and we can expect increasing tax burden in the near future. But still, given that there is no clear consensus about the optimal solution of the interlinked problem of low economic growth, government revenue, expenditure, and debt, the approach of the Czech government seems to be relatively appropriate.
General assessment
Winning the September 2011-election on a promise of higher taxes, the centreleft government made good on election promises in the 2012-budget by increasing taxes by half a percent of total tax revenue. In the spring of 2012 further tax increases followed on cars and energy consumption. Increasingly, however, the tax hikes (implemented and promised) became unpopular with large parts of the population as well as the governments supporters in labour unions; and in the summer of 2012 the government and the right wing opposition agreed on an income tax reform which for the first time in many years actually lowered the overall tax burden. In many ways, the tax reform marked a turning point in the tax debate, and the 2013-budget surprisingly included a cancellation of a number of unpopular taxes.
While Estonia has rebounded well from the crisis and is still an attractive destination for Nordic companies there needs to be a political thrive towards keeping Estonia’s competitive advantage. In the time were our close neighbours are discussing possibilities for making their economic environment more friendly to entrepreneurs, the local government has to react accordingly. Although being known for progressive and bold economic reforms, Estonia has become to a halt over the recent years. To battle the rising taxes and the growing public sector significant changes must be enacted. Unless necessary steps are made the current 10% public debt is only the beginning of a race to catch up with the Western Europe.
In the spring of 2013, the Finnish government held its half-way assessment, in which it reviewed and revised the government policy program for the remaining two years of its mandate, until the next general election in 2015. The main focus was again on the taxation of dividends. However, the proposal put forth by the government was met with so much criticism that even the leader of the Leftist party, one of the governing parties, turned against it. The government quickly published a revised proposal, but at the time of this writing, it is still unclear what the final rules will look like. It seems clear, however, that excise taxes such as taxes on alcohol, sweets and tobacco will be raised. The government is still trying to shrink the deficit and improve employment, but it is doubtful if it will be successful.