Companies & Regulation

The Fitch rating agency on Tuesday downgraded Greece’s long-term debt ratings as well as those on four of the country’s largest banks, describing prospects for Greek public finances as negative. Greece is now exposed to the risk of losing the small amount of credibility it still has in front of its creditors. The concerns are growing about its ability to pay its huge public debt, estimated to 110% of GDP and budget deficit above 12.7% of GDP. A look at the evolution of the external debt of Greece is illustrating the concern of credit rating agencies and international financial markets:

Public Spending and Growth by Patrick Minford and Jiang Wang

L’endettement de l’Etat: stratégie de croissance ou myopie insouciante ? – Pierre Garello, Vesselina Spassova (french and english versions available)

Taxation and Economic Growth: Reconciling Intuition and Theory – Dalibor Rohá?

Taxation, Individual Incentives and Economic Growth – Alex Robson

The American healthcare system is stigmatized in Europe, and especially in France, where the government is pretending to offer a high quality health services to every French citizen, regardless of his contribution to the social security. But if the French social security system succeed in one task – covering the uninsured, it failed in two others, much more important issues – controlling costs and innovation. A recent study edited by the Cato Institute is evidencing the superiority of the American healthcare system when it comes to innovation in medical treatment.

The UK post office Royal Mail is at least as fervent adept to strikes as the French Poste office. The Unions chose the open clash with the managers, rather than to follow the privatization plan. It is true that the privatization of Royal Mail would compromise a lot of the “traditions” in the company. For example, in the beginning of the decade 10 000 of the 170 000 employees were missing every working day, without any valuable reason. The cost of this absenteeism was 350 mln. of pounds per year.

France’s Draft 2010 Finance Bill provides for the abolition of the Business Tax, which is perceived by local communities and currently accounts for 10% of their revenues. Called by François Mitterrand “the idiot tax”, the Business Tax is the main local tax, paid every year by nearly 2,9 mln of companies. It is based on the investment in equipment done by local firms (the basis of the tax is the rental value of a company’s tangible fixed assets) plus 1.5% tax on the value added for companies with a turnover exceeding 7.5 mln €.

Abstract: This paper surveys possible motivations having a net wealth tax. After giving a short overview over the state of wealth taxation in OECD countries, we discuss both popular arguments for such a tax, as well as economic arguments. It is argued that classical normative principles of taxation known from public economics cannot give a sound justification for a net wealth tax. The efficiency-related effects are also discussed and shown to be theoretically ambiguous, while empirical evidence hints at a negative effect on GDP growth.

Abstract : When serial bank robber Willie Sutton was apprehended at last, someone asked him why he had robbed so many banks: “Because that’s where the money is,” Sutton famously replied. The idea of taxing wealth, whatever its merits, seems to suggest itself as naturally. One may well doubt whether it is wise or prudent to equate any form of taxation so casually with grand larceny; less doubtful is the fact that both designs on the money of some by the ambitions of others are likely to end in disappointment.

The model presented in the paper leads us to predict that the level of redistribution will be all the more important where the jurisdictions have been able to shelter themselves…

By drawing on the median voter model, George Stigler (1970) provided a theoretical basis for the alleged empirical regularity found by Aaron Director that income redistribution runs from the poor and the rich to the middle classes. The median voter model is however only applicable to describe modern representative democracies under relatively strong and unrealistic assumptions, which makes alternative equilibria of income redistribution equally plausible.