Companies & Regulation

Fortune has ranked the 50 most admired companies worldwide. Of course, Apple, Google, Amazon and Coca Cola are above all others. Among non-US companies can be found two German companies…

The French Government supporting private companies thanks a system of financial assistance: what an economic heresy! Yet, over the last thirty years, it has become the creed for French Governments, whether conservative of leftist. Four figures are to be pointed out:

Why would you stay in a country where there are more than 200 types of taxes? And in which taxes are piled up and never removed. If French President François Hollande and his government want to fight against tax havens, French taxpayers and entrepreneurs are battling against the daily tax hell they are living in.

Since events related to financial, banking, and debt crises regularly make it into the news, a term that seemingly originated from the Bank for International Settlements (BIS) in the late 1970s has become more popular: macroprudential supervision. Whereas microprudential supervision relates to the oversight of individual market participants (e.g. banks), macroprudential policy relates to the supervision of an entire system (e.g. the financial system).

In a recent post, Nicolas Lecaussin is pointing out that tax consequences can be studied as in a lab: some American States can be observed. Taxes were lowered in thirty States. If they gather only 20% of the US population, they have created 65% of US jobs.

Germany and Finance Minister Wolfgand Schäuble do not press for setting up a banking union and rejects a centralized authority whereas France and Finance Minister Pierre Moscovici are urging to set up the banking union through centralization. The latter position is also the Commission’s. The Eurozone financial convergence will prove to be complex: European negotiations are at a crossroad not knowing which paths to take yet.

Big Governments usually do not trust people or companies to improve living conditions. That is why notions of “social justice”, “solidarity”, “equality” and above all “sharing” were hijacked by Governments and turned into an economic principle: redistribution. Since it is believed the Government is the only organization that can be fair and would share wealth without any interests of its own, collectivism has been on the top of political agendas. Reality and practice have blown up this utopian belief: Governments are acting for their own interest, the one of the public sector, hampering the private sector’s growth. Yet “sharing” does not need any Government to be implemented: citizens can do it on their own and be even more generous than Governments could imagine. A recent study done by Sinan Aral, an assistant professor and a Microsoft Faculty fellow at NYU’s Stern School of Business, leads us to believe that economic “sharing” and distribution of “wealth” do not need any Government to be fair. People can be trusted!

Knowledge has now become a capital investment and no longer a cost of producing goods. This change has been announced by Brent Moulton, head of national accounts at the Bureau of Economic Analysis (BEA), on April 22nd, 2013. This will change the way gross domestic products are calculated. It will lead to an immediate 3% growth in the United States’ GDP.

The new IREF paper of Stefan Lutz, from the University of Manchester, UK, and the Universidad Complutense de Madrid, Spain, points out that if it is apparent that companies do not welcome taxation, the main reason is that taxes reduce profits: shareholders are disappointed and the prospects for investments and development are penalized. This paper, however, concentrates on how companies react to taxation by changing their “gearing ratio”, i.e. the compositions of the financial resources at their disposal by investigating a panel of 240,000 European firms during the 1985-2010 period.

France is the best example of this economic truth. The French public sector is undermining the economy. It must be pointed out that in Spain and Ireland the crisis was due to a real-estate bubble. In France, the crisis is worsened by an obese bureaucracy. The trend is striking: the French public sector is growing faster than the private sector since 1987.