“Getting to Denmark" from Indonesia: Starting from State Institutions or Tax Capacity?

Introduction/Main Objectives: This paper is aimed at answering the following research questions: Where should Indonesia’s journey toward a prosperous society start from? Should state institutions be improved first to increase the tax collection necessary to finance this journey? Or should the tax capacity be improved first to help improve the institutions? Background Problems: Maintaining good quality state institutions requires fiscal support and, vice versa, maintaining fiscal support through tax revenue requires the existence of good quality state institutions. This paper empirically examines which of these two aspects needs to be improved first to achieve a better society for Indonesians. Novelty: To the best of the author’s knowledge this paper may be the first that tries to empirically explore the causal relationships between the quality of Indonesia’s state institutions and its tax capacity. Research Methods: Answers to the research questions were approached by employing a vector error-correction model of governance indicators and tax revenue data for Indonesia, covering the period from 2002 to 2017. Finding / Results: It has been found that, for Indonesia, the quality of the state institutions and the tax capacity did not have a causal relationship in any direction. Conclusion: Indonesia seems to be caught in a dilemma: On one side, choosing the strategy of improving the quality of the institutions first may not be sustainable because it is unlikely to lead to improvements in the tax capacity, thus the prospects for sustaining good-quality institutions may be uncertain due to the possible lack of fiscal support. On the other hand, improving the tax capacity first does not seem to be a reliable strategy either because it may not result in better quality state institutions, hence revenue mobilization efforts might not be effective due to the incomplete support provided by the poor-quality institutions

An Analysis of Bank Competiveness, Financial Intermediation and Entrepreneurship Development in African Economies

Given probable nexus between financial intermediation and entrepreneurship development, this paper uses multivariate regression techniques to test the impact of bank competitiveness on the nexus in forty-two African economies. With data obtained from the World Development Indicators, the results reveal that lending rates, the proxy for financial intermediation positively impacts business start-up-cost, the proxy for entrepreneurship, while bank competitiveness negatively impacts business start-up-cost, which suggests that banking competitiveness has the capacity to improve entrepreneurship in African economies. The region’s economies should reduce monetary base rates to single digit; advanced liberalization of the financial industry; encourage stronger competition through digital finance; lessen the requirements for new conventional bank entry; provide fiscal support for increased bank branching

Euro-area outlook depends on continued fiscal support

Significance The lifting of most COVID-19 restrictions, the revival in intra-EU tourism and a strong rebound in private consumption are key factors behind the optimistic forecasts. The outlook, nevertheless, is uncertain due to COVID-19. In addition, southern European economies are not expected to return to pre-pandemic growth levels until 2023. Impacts Euro-area inflation is unlikely to rise above 2% over the coming years. Southern countries risk facing a new 'brain drain' wave once international travel returns to pre-pandemic levels. EU states with closer trade relations with the United States will benefit from the US fiscal stimulus and the appreciation of the dollar.

The Mechanism And Effects of National Smart City Pilots In China On Environmental Pollution: Empirical Evidence Based On A DID Model

The policy of the national smart city (NSC) pilots, a new type of urbanization for future development, has been implemented in China in batches. This paper investigates the mechanism and effects of the NSC pilots on the environment. Using the prefecture-level panel data during 2004-2018 period, our dynamic difference-in-differences (DID) estimation shows that the NSC pilots causally mitigate air (water) pollution by 21.5% (23.3%). The mediating effect model indicates that the allocation efficiency and technological innovation play a partial mediating role in the impacting mechanism. After introducing the two mediating channels into the dynamic DID model, the reduction effect for air (water) pollution drops to 15.5% (17.3%). Comparatively, improving allocation efficiency instead of technological innovation takes the major mediating role in reducing air pollution, while water pollution the opposite. The result of city heterogeneity shows that cities with high human capital and fiscal support contribute to the reduction of environmental pollution. This study also provides some related policy suggestions by analyzing the initial mechanism and city heterogeneity of the NSC pilots.

A SWOT ANALYSIS OF THE INNOVATION BOX AS A TAX INSTRUMENT TO SUPPORT INNOVATION BY ENTERPRISES IN POLAND

The Innovation Box – a tax relief introduced in Poland in 2019, serves as a complementary element of fiscal support and the final link in the chain of innovation support. This preference isnot applied at the stage of creating new solutions (as was the case with the tax relief for purchasing new technologies and has been the case with tax relief for research and developmentactivity since 2016), but at the stage of their commercialisation. It may, thus, contribute to a greater interest and scale of application of the relief for research and development activity. Theaim of this article is to present the essence of the Innovation Box, as well as to conduct a SWOT analysis of this tax relief as an instrument of support for innovation by enterprises. A SWOTanalysis has corroborated the remarks – previously made by industry practitioners – concerning the ambiguous and complicated mechanism of the Innovation Box. However, along with theconsolidation of the practice of applying this tax relief, interest in it may increase, which in turn might be conducive to Polish enterprises.

Covid-19 Response Models and Divergences Within the EU: A Health Dis-Union

The symmetric shock of the Covid-19 pandemic has come with heterogeneous consequences across the world. Within the common institutional framework of the European Union, the outbreak has put under extreme stress governance and interplay between the national and supranational level. Under some coordination, responses have remained largely in the hands and on the shoulders of the Member States. In this context, the article classifies pandemic outbreaks and responses along the containment and fiscal support dimensions to uncover whether a common model for Covid-19 crisis management arises across the EU27 or rather different policy choices patterns emerge within the continent. Based on indicators covering the three dimensions derived from the Oxford Covid Government response tracker, the John Hopkins CSSE Covid-19 database and the European Commission Autumn Forecasts, the paper employs hierarchical cluster analysis to uncover response group across countries and characterize them by the outbreak, containment and fiscal support strengths, delineating as well the geographical distribution across and within the clusters. The findings present the heterogeneity of response models, robust to alternative specifications and timeframes across the first and the second wave, deriving broader implications for the outlook for the vaccine-roll out and exit from the crisis. The dynamics in 2020 are also considered in the context of the shortcomings of supranational governance within the EU and the current policy reform debate, highlighting the high stakes for the upcoming Conference on the Future of Europe. The contribution of the work is furthered by offering a systematic methodology and framework to study heterogeneities of pandemic responses within the EU paving the way for further analysis of contributing factors explaining decision-makers policy choices as well as performance concerning political, social and economic outcomes across the models.

IMF deal may aid economic stabilisation in Suriname

Significance This is positive news for the country, which experienced a sharp economic decline in 2020 and had been struggling to bolster economic activity for several years before that. New President Chandrikapersad Santokhi will hope that the IMF deal gives his administration some breathing room to enact unpopular economic measures. Impacts Ongoing discussions with China could lead to supplementary aid and financing from Beijing. Increased fiscal support will encourage greater investment, especially into the oil sector. Greater economic cooperation with Guyana on oil projects will boost the sector's outlook.

More tax on asset gains is likelier than a wealth tax

Significance Developed economies have implemented fiscal support measures worth over 16% of their GDP to combat the pandemic's impacts. To pay off the resulting debt and to ensure sufficient revenue in the face of a fragile and uneven recovery, new taxes and higher rates are being considered. Impacts Levying a wealth tax on productive firms risks starving them of capital for the future. If levied too high or too long, people would sell assets to pay, depressing asset prices, reducing investment and prompting outflows. Criticisms of wealth taxes mean that a one-off surcharge on investment income above a certain threshold would be easier and more popular.