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5661. The Enron Debacle: Lessons for Tax Policy

Author:
Jane G. Gravelle
Publication Date:
02-2003
Content Type:
Working Paper
Institution:
Urban Institute
Abstract:
The Enron debacle had potential implications in three areas of tax policy: tax-favored retirement plans, stock options, and differences in book versus tax accounting. The most important issue relates to the increasing riskiness of retirement plans that (1) can pay in a lump sum amount, (2) are of the defined contribution variety, and (3) may be excessively concentrated in employer stock. Proposals to remedy this issue even in a limited way may be unsuccessful if they do not address the especially favorable tax treatment of employee stock ownership plans (ESOPs). Most stock options do not benefit from preferential treatment, although for both book and tax purposes it may be desirable (and feasible) to recognize compensation payments at the time of grant. Stock options may not be accomplishing their purposes efficiently, and special benefits (such as those for qualified stock options) might either be reconsidered or restricted to plans with desirable features. The spectacle of a purportedly profitable company paying little or no tax has become a common phenomenon. The Enron case suggests the need for more disclosure regarding the sources of book versus tax differences, if not some substantive corporate tax reforms.
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
United States

5662. The Politics of the German Company Network

Author:
Martin Höpner and Lothar Krempel
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
For over 100 years, the German company network was a major feature of organized corporate governance in Germany. This paper uses network visualization techniques and qualitative-historical analysis to discuss the structure, origins and development of this network and to analyze the reasons for its recent erosion. Network visualization makes it possible to identify crucial entanglement patterns that can be traced back historically. In three phases of network formation – the 1880s, 1920s and the 1950s –, capital entanglement resulted from the interplay of company behavior and government policy. In its heyday, the company network was de facto encompassing and provided its core participants, especially the banks, with a national, macroeconomic perspective. In the 1970s, a process of increased competition among financial companies set in. In the 1980s and 1990s, declining returns from blockholding and increased opportunity costs made network dissolution a thinkable option for companies. Because of the strategic reorientation of the largest banks toward investment banking, ties between banks and industry underwent functional changes. Since the year 2000, the German government's tax policy has sped up network erosion. Vanishing capital ties imply a declining degree of strategic coordination among large German companies.
Topic:
Economics, Government, and Governance
Political Geography:
Europe and Germany

5663. Stabilizing Postwar Europe: Aligning Domestic and International Goals

Author:
Armin Schäfer
Publication Date:
07-2003
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
This paper looks at the historical developments that led to the Schuman Plan in 1950, which today is seen as a starting signal for the European integration process. It argues that this announcement by the French foreign minister constituted a genuine change of strategy that can only be understood in the light of the preceding historical chain of events. The first steps of European integration were part of a search for suitable institutions capable of dealing with Europe's economic and political problems, which also involved the Bretton Woods institutions, Marshall Aid and the OEEC, and, finally, the ECSC. These organizations' respective fate depended on the strategies of key states, which in turn were driven by domestic concerns. Aligning their interests took several steps and was only completed when all three organizations existed in parallel. Throughout this process, all states had to abandon their preferred course of action and learn to settle for second best.
Topic:
Civil Society, Economics, Government, and International Trade and Finance
Political Geography:
Europe

5664. A Comparative Study of Business Lobbying in the European Parliament, the European Commission and the Council of Ministers

Author:
Pieter Bouwen
Publication Date:
04-2003
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
The aim of this paper is to empirically test a theory of access that investigates the logic behind the apparent ad hoc lobbying behavior of business interests in the EU multi-level system. First, I propose the theoretical framework that attempts to explain the access of different organizational forms of business interest representation (companies, associations and consultants) to the European Commission, the European Parliament and the Council of Ministers. The degree of access to these institutions is explained in terms of a theory of supply and demand of access goods. Access goods concern information that is crucial in the EU policy-making process. In return for access to an EU institution, business interests have to provide the access good(s) demanded by that institution. I then derive a number of specific hypotheses about the access of the aforementioned organizational forms. These hypotheses are analyzed in an extensive empirical study of the EU financial services sector. On the basis of 126 exploratory and semi-structured interviews the hypotheses are checked across the three EU institutions.
Topic:
Economics, Human Welfare, and International Trade and Finance
Political Geography:
Europe

5665. Remittances by Emigrants: Issues and Evidence

Author:
Andrés Solimano
Publication Date:
12-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Remittances, after foreign direct investment, are currently the most important source of external finance to developing countries. Remittances surpass foreign aid, and tend to be more stable than such volatile capital flows as portfolio investment and international bank credit. Remittances are also an international redistribution from low-income migrants to their families in the home country.
Topic:
Development, Economics, International Trade and Finance, and Migration

5666. Innovative Sources for Development Finance: Over-Arching Issues

Author:
Anthony B. Atkinson
Publication Date:
12-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
In analysing proposals for new sources of development funding, there are several issues that arise across the board. What is the role of new sources in relation to existing overseas development assistance? Should we be seeking new sources that generate a double dividend? Can the key elements of a proposal be achieved by another route? What should be the fiscal architecture? Is there a modern transfer problem? It is with these general concerns that the present paper deals. Its aim is to bring to bear on global public finance the accumulated knowledge in the field of national public finance, and more generally public economics.
Topic:
Development, Economics, and International Trade and Finance

5667. National Taxation, Fiscal Federalism and Global Taxation

Author:
Robin Boadway
Publication Date:
12-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper considers lessons from the practice of fiscal federalism for guidance on new approaches to development finance. Despite the fact that inter-regional redistribution in a federation relies on a central government with strong fiscal powers, the form of that redistribution can be used as a benchmark for international development assistance financing. In a federation, finance for less-developed regions takes the form of equalizing transfers to sub-national governments. The objective of these transfers is to enable sub-national governments to provide comparable levels of public services at comparable tax rates, called fiscal equity, leaving them discretion to implement interpersonal redistribution schemes within their jurisdictions. This same principle of assuming that national governments rather than donor nations are responsible for vertical equity within their borders leads to the view that the ideal form of development assistance is a system of equalizing inter-nation transfers intended to enhance fiscal equity.
Topic:
Development, Economics, Government, and International Trade and Finance

5668. Environmental Taxation and Revenue for Development

Author:
Agnar Sandmo
Publication Date:
12-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper considers the role of global environmental taxes both as instruments for improving the global environment and as a source of revenue for funding economic development. It reviews the general case for environmental taxes and the particular issues that arise for the adoption of such taxes in an international setting without a single jurisdiction. It also discusses the possibilities for political acceptance of such taxes when tax revenue is linked to the goal of economic development. The revenue potential of global environmental taxes is evaluated with special reference to a global carbon tax. It is found that this tax alone has the potential to raise sufficient revenue to finance the United Nations' Millennium Development Goals.
Topic:
Development, Economics, Environment, and International Trade and Finance

5669. Which Types of Aid Have the Most Impact?

Author:
George Mavrotas
Publication Date:
12-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The paper uses an aid disaggregation approach to examine the impact of different types of aid on the fiscal sector of the aid-recipient country. It uses time-series data on different types of aid (project aid, programme aid, technical assistance and food aid) for Uganda, an important aid recipient in recent years, to estimate a model of fiscal response in the presence of aid which combines aid disaggregation and endogenous aid. The empirical findings clearly suggest the importance of the above approach for delving deeper into aid effectiveness issues since different aid categories have different effects on key fiscal variables—an impact that could not be revealed if a single figure for aid was employed. More precisely, project aid and food aid appear to cause a reduction in public investment whereas programme aid and technical assistance are positively related to public investment. The same applies for government consumption. A negligible impact on government tax and non-tax revenues, and a strong displacement of government borrowing are also found.
Topic:
Economics, International Trade and Finance, and Poverty
Political Geography:
Uganda and Africa

5670. Loan Processing Costs and Information Asymmetries - Implications for Financial Sector Development and Economic Growth

Author:
George Mavrotas and Salvatore Capasso
Publication Date:
12-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The paper presents a model in which credit-constrained firms might delay the adoption of new and more productive technologies because of the very high external financing costs they face. Our point of departure is that the efficiency of the banking system can have a profound impact on real resource and investment allocation not only directly, by reducing the amount of resources channelled to the credit market, but also indirectly by affecting entrepreneurs' investment decisions. Along these lines of reasoning we develop a model of information asymmetries in the credit market in which high costs of processing bank loan applications might obstruct investments in high-tech projects and favour, instead, low-return, self-financed investments in mature sectors. The result is that these kinds of costs have a negative impact on the average capital productivity and on the rate of economic growth. In specific circumstances, the combination of these costs and the dynamics of capital accumulation can be such that the economy incurs in a 'technology trap', in which new technologies, even if readily available, will never be adopted because of high frictions and inefficiencies in the credit market, a situation that seems to be relevant to many developing countries.
Topic:
Development, Economics, and International Trade and Finance