Browse by: "2019"

The Network on Fiscal Relations has been assessing the degree of sub-central government tax autonomy in OECD countries for almost two decades. This paper provides an in-depth description of the methodology used to characterise tax autonomy. After summarizing the wide-spread use of the tax autonomy results by researchers addressing a range of policy issues, the paper highlights recent trends in sub-central government revenues and presents the results of the latest survey of tax autonomy, completed in 2017. Using the OECD’s tax autonomy methodology, the paper for the first time assesses local government tax autonomy in the 50 US states. The analysis reveals that US local governments have somewhat more tax autonomy than local governments in the average OECD country. The paper includes suggestions for further refinements of the tax autonomy methodology.

This paper documents recent extensions and revisions made to the model underlying the long-run global macroeconomic scenarios that are published every few years. First, a fiscal block is added for 11 countries that previously lacked one. Second, public pension expenditure projections are made endogenous to the projected ratio of retirees to workers and to a hypothesis on the future evolution of benefit ratios. Cross-country differences in projected public pension expenditure thus reflect many factors, including the speed of population ageing, the evolution of employment rates for older people, especially females, and rules regarding the evolution of statutory retirement ages. Third, revised public health expenditure projections introduce a higher income elasticity in middle-income than high-income countries and makes the excess of health care inflation over GDP inflation (Baumol effect) endogenous to the projected labour productivity growth rate. And fourth, the determination of long-term interest rates is revised to associate the fiscal risk premium to net, as opposed to gross, government debt, and make its size conditional on euro area membership, the quality of public governance and the occurrence of systemic banking crises, while allowing a flight-to-safety effect during such crises to lower bond yields in countries that are providers of global safe assets.

The population in OECD countries is ageing rapidly, which will have significant macroeconomic impacts, including on public expenditure and tax revenues. This paper analyses the consequences of population ageing at the sub-central government (SCG) levels and introduces the ‘SCG fiscal vulnerability to ageing’ indicator. This indicator identifies the countries in which SCGs on average are “vulnerable” to the ageing of their population from a fiscal perspective (both from the expenditure and revenue side). The paper posits that the economic and fiscal consequences of an ageing population goes beyond the central-SCG boundaries. Therefore, in order to make fiscal frameworks “ageing-resilient”, countries require a coherent fiscal strategy, which focuses on tax and spending reforms, with a whole-of-government approach that brings together central governments and SCGs.

This report showcases how triangular co-operation can contribute to achieving ‘green’ objectives (e.g. on climate change mitigation, climate change adaptation, biodiversity, desertification, and local environmental issues). Data collected through an OECD survey on triangular co-operation (2015) and desk research uncovered 224 triangular projects targeting green objectives, involving 91 countries and international organisations, out of a total of 658 triangular co-operation projects for the period 2014-18. Given the available evidence (data, evaluations and interviews with project managers), the report shows that triangular activities can deliver green goals in innovative, flexible and cost-effective ways within and across regions – and thus could help accelerate implementation of the Sustainable Development Goals and other international green agreements (e.g. the Paris Agreement). Nevertheless, there are several barriers that prevent further deployment of this modality, including lack of awareness on triangular co-operation among the different green communities, insufficient evidence on the potential of green triangular co-operation, and few dedicated vehicles that can pilot and scale-up successful initiatives. The report proposes a number of recommendations for policy makers to overcome these barriers.

Illicit financial flows (IFFs) in West Africa have long contributed to the region’s instability, partly due to their links to regional terrorist organisations such as Al Qaeda in the Islamic Maghreb (AQIM). AQIM has directly and indirectly participated in and perpetuated illicit financial flows in the region not only through violent means but also through diverse links with the local economy and society. AQIM and its regional affiliates have a profound influence on the political economy of the Sahel and the Maghreb, as well as greater West Africa, and it is important to understand the role played by AQIM in IFFs and the means by which this drives regional instability. This case study examines the political-economic context and the nature and scope of the mechanisms through which AQIM (and its affiliates) operate, with particular emphasis given to their interaction with the local economy and any resulting IFFs.

This paper explores the flow of illicit narcotics transiting West Africa. It is divided into four sections, providing an overview of the nature and scope of the illicit narcotic economy, the networks and actors involved and its development impacts, including its resulting illicit financial flows, the movement and impact of those financial flows, both to buy protection and to invest drug profits from West Africa, and finally, it provides concluding remarks that could inform future policy action. The paper is based on a review of the available secondary literature and interviews, and focuses on the cocaine trade due to the preponderance of available information and data compared to other types of drug trafficking. Comparisons or distinctions are also drawn between other illicit narcotics and emerging trends are highlighted where credible evidence is available.

La declaración de la reunión Ministerial de Cancún sobre Economía Digital destacó la importancia de desarrollar indicadores del IoT que permitan evaluar sus efectos en distintas áreas de políticas (OCDE, 2016). Por ello, en el presente informe se revisan distintas definiciones del IoT en el contexto de establecer una definición operativa para el trabajo del CDEP, y se propone una taxonomía para su medición. Asimismo, en este informe se exploran los posibles desafíos para las infraestructuras de telecomunicaciones derivados del crecimiento exponencial de los dispositivos de IoT mediante la aplicación en vehículos conectados y autónomos. Se eligió esta aplicación del IoT ya que los requisitos para la transmisión de datos de los vehículos totalmente automatizados podrían tener implicaciones importantes para las infraestructuras de red, y, por lo tanto, podrían ser prioritarias en términos de medición.

Además de ofrecer una mayor variedad de productos y conveniencia a los consumidores, se espera que el IoT revolucione la forma en que los procesos de diseño, fabricación y entrega de productos se supervisen, analicen y mejoren, incluso de manera remota.

This paper assesses Italy’s 2019 tax and benefit reforms, analyses hypothetical reforms and proposes a reform package that balances goals of reducing poverty, encouraging employment and fiscal sustainability. Using the OECD’s Tax-Benefit and the EUROMOD microsimulation models, it shows that the new guaranteed minimum income scheme introduced in 2019 significantly strengthens Italy’s low income protection system but can also financially discourage recipients from working. The debated flattening of personal income tax rates would do little to improve work incentives, but would drastically cut tax revenues and increase inequality, by reducing the progressivity of the personal tax system. A proposed reform package that maintains progressive personal income tax rates, gradually withdraws low-income support and provides additional benefits for low-wage earners would make inroads into poverty and inequality while encouraging formal work. This paper accompanies and extends the results of the in-depth chapter of the OECD 2019 Economic Survey of Italy (2019_[1]) on social and regional disparities.

The Paris Agreement states that all countries should strive to formulate and communicate long-term low greenhouse gas emission development strategies (LT-LEDS) and the Paris Agreement’s accompanying decision invites countries to communicate a LT-LEDS by 2020. LT-LEDS are a fundamental tool available to countries to envision low-emission development in alignment with broader sustainability, socio-economic and climate change adaptation goals. This document aims to support countries’ efforts in the development of LT-LEDS, as it provides points of reflection for the establishment of an effective process for developing LT-LEDS. The document discusses potential elements to be included in a LT-LEDS; identifies and explores potential linkages between Nationally Determined Contributions (NDCs) and LT-LEDS; examines governance options for setting up a LT-LEDS process and analyses countries’ experience to date in developing LT-LEDS. The paper also provides a set of guiding questions useful for the development of LT-LEDS.

Different options of methodological approaches for setting emission baselines are currently under consideration in the international climate negotiations. This paper examines options for baseline approaches for the Article 6.4 mechanism, and draws lessons from how baselines have been used for other market mechanisms. The paper highlights that the different approaches being discussed offer advantages and disadvantages in the context of Article 6.4. Moreover, the paper points out that a one size- fits-all approach to setting baselines is unlikely to be appropriate for the new mechanism, given the variety of possible mitigation activity types and contexts. In particular, analysis of Clean Development Mechanism projects shows that a single baseline approach led to wide variations in baseline levels, implying the need to revise some methodologies if they are to be applied to Article 6.4. The paper also discusses benefits and implications for host Parties participating in the Article 6.4 mechanism, which may affect how Parties achieve their NDCs.

This paper assesses the impact of exchange of information on foreign-owned bank deposits in international financial centres (IFCs). Based on a dataset with extended jurisdiction coverage and sample length, foreign-owned IFC deposits declined globally by 24% or USD 410 billion during the period from 2008 to 2019. The commencement of automatic exchange of information is associated on average with a statistically significant 22% reduction in IFC bank deposits held by non-IFC counterparty jurisdictions. The results show that exchange of information on request was associated with a reduction of around 10% during the early years of implementation. Robustness checks show that voluntary disclosure programmes do not drive the results. These findings highlight the effectiveness of the expansion of automatic exchange of informationand provide further evidence of the success of a comprehensive multilateral approach towards international tax transparency.