Who Will Pay Amount A?
This month 132 countries reached a  landmark agreement on fairer taxation of multinational companies (MNEs) through a “Two-Pillar solution”. Pillar One of the OECD/G20 agreement requires large multinationals to pay a portion of their taxes in countries where they generate revenue, regardless of whether they have a physical presence there. The mechanism through which countries are provided with this new taxing right over a share of an MNE‘s residual profit is called “Amount A”.
A new EconPol Policy Brief by Michael Devereux and Martin Simmler from Oxford University reveals that the latest OECD tax reform will affect only 78 of the world’s 500 largest companies and only about 37 European companies. Here is why.
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The Existential Trilemma of EMU in a Model of Fiscal Target Zone
The European Economic and Monetary Union (EMU) would be better prepared for future crises if it puts monetary and fiscal mechanisms in place that safeguard its integrity. According to this EconPol Working Paper by Pompeo Della Posta and Roberto Tamborini, the financial crisis and the coronavirus crisis have shown that either monetary orthodoxy or fiscal orthodoxy, or both, need to be relaxed to keep the EMU together. The study shows that any plan to complete the European Monetary Union should put a central monetary and/or fiscal policy backstop alongside the irreversibility principle. The authors illustrate the concept by means of a target-zone model and show how such monetary and fiscal mechanisms could be designed. The alternative to creating such mechanisms is to include an explicit exit clause in the treaties, the authors argue.
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European Structural Funds and Resilient and Recovery Facility Governance
The implementation of recovery funds under the EU’s Covid-19 recovery program
NextGenerationEU should be aligned with business cycle phases to ensure that financial support will have the most even and efficient impact across regions. This is a lesson drawn from an EconPol research on the efficiency of the EU’s Cohesion Policy between 1986 and 2018. Researchers Carlos San Juan Mesonada and Carlos Sunyer Manteiga find that the least developed regions were the ones worst hit by the 2008 financial crisis, and also the ones where European aid proved least effective. According to the study, one way out of the dilemma is to ease co-financing requirements during economic downturn phases and to adapt funds to the business cycle phase.
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Current Account Targeting Hypothesis versus Twin Deficit Hypothesis: The EMU Experience of Portugal
In their latest EconPol Working Paper António Alfonso and José Carlos Coelho revisit Portugal’s history of chronic public and external deficits since its adoption of the Euro currency, setting out resulting policy implications. Drawing on the Current Account Targeting Hypothesis and the Twin Deficit Hypothesis, the study analyzes the relation between Portugal’s government budget balance and current account balance from 1999 to 2019. One key finding of the research is that a tightening of fiscal policy may improve the external balance of the Portuguese economy. However, the effect proves not to be substantial, especially in an economic crisis.
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News Update | EconPol Europe Annual Conference 2021 | 13–14 October
Due to the uncertain development of the coronavirus pandemic, we decided to conduct EconPol’s fifth annual conference exclusively online. Even though we are disappointed not to be able to meet our partners, researchers, and other guests in person for the second year in a row, we welcome the opportunity to open up participation to a broader audience. Day 1 of the conference will discuss the topic “The State of Fiscal Resilience – How Prepared is Europe for Future Crises” with a panel debate on “Fiscal Policy for the Post-Covid Era: US versus EU”. Day 2 academic sessions will include such topics as economic growth & climate change, international taxation and further current research from the EconPol Europe network. There will be a livestream on day 1 of the conference. We will share further details on the program and on the registration process in due course.
Visit our website
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Reminder | Call for Papers: MIFE Inaugural Conference and Early Career Workshop on Financial Literacy Across the Disciplines | 29 November – 2 December
The inaugural conference of the Mannheim Institute of Financial Education (MIFE), a joint venture of our EconPol Partner ZEW Mannheim and the University of Mannheim, will take place from 29 November to 2 December. As part of the conference, early career researchers from various disciplines are invited to a workshop where they can present and discuss their work. Topics may be related to (but are not confined to) the MIFE’s research areas, i.e. sustainable financial education across the lifespan, digitalization and financial education, long-term financial decisions and old-age provision. The Deutsche Bundesbank is sponsoring an Early Career Research Prize on Financial Literacy (€5,000), which will be awarded to the best paper submitted. The deadline for paper submissions to this workshop is 1 September 2021.
More information on paper submissions
More information on the conference and on the workshop
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