Destination-Based Cash Flow Taxation

This chapter sets out and evaluates our second main proposal: the Destination-based Cash Flow Tax (DBCFT). This has two basic components: (a) a ‘cash flow’ element, which gives immediate relief to all expenditure, and (b) a ‘destination-based’ element, which introduces border adjustments of the same form as under the value added tax (VAT): exports are untaxed, while imports are taxed. This is equivalent in its economic impact to introducing a broad-based, uniform rate VAT and making a corresponding reduction in taxes on wages and salaries. A central motivation for the DBCFT is to improve economic efficiency by taxing business income in a relatively immobile location; the DBCFT should not distort either the scale or the location of business investment. It also has the considerable advantage of being robust against avoidance through inter-company transactions.

The effects of the Treaty of Trianon on the pharmaceutical network

The consequences of the border adjustments resulting from the Treaty of Trianon affected the entire Hungarian pharmaceutical network. Transylvania, Maramureș and East Banat became part of Romania and Hungary lost 102.813 km2 of its former territory. A Hungarian population of 1,662,000 (based on the 1910 census), 31.78% of the total population, came under Romanian rule. 477 Hungarian pharmacies were lost in 327 locations. Later, in the areas given to Romania, several pharmacies ceased to function due to the emigration of their owners and their staff. Romanian authorities issued 174 new pharmacy rights in the gained territories, bringing 65.5% of the pharmacies into Romanian hands. The Pocket Calendar of Pharmacists, published in Budapest in 1918 still lists the Transylvanian pharmacists, mentioning the name of their pharmacy and the place where they worked. Pharmacist almanacs (pocket calendars) published in later years no longer provided this information.

Scale Matters

Climate change has palpable cross-scale implications given the severity of the matter epitomized in the prolonged discussions and negotiations between various parties that incur the consequences of the policy applications. Cross-border adjustment, though seemingly plausible, is a controversial method employed to mitigate the adverse potential impact of carbon emissions through placing an extra cost for the goods imported from countries that lag behind the standards set by multiple global agreements. Exercising cross-border adjustment on international trading activities is likely to have positive reverberations on taming the perils posed by climate change as well as triggering unforeseen perturbations in the interaction of actors involved in the global trading system. This chapter intends to shed light on cross-border adjustments via diagnosing the issues emerging out of the inter-scale interactions and question its effectiveness in micro and macro terms.

BORDER ADJUSTMENTS SUPPLEMENTING A CAP AND TRADE SYSTEM TO COMBAT CLIMATE CHANGE

In the post-Paris Agreement era, the number of carbon pricing initiatives in order to combat climate change grows continuously. However, carbon prices vary substantially among countries which yields negative drawbacks in terms of carbon leakage and loss of competitiveness for firms producing in countries with more stringent regulations. Border adjustments (BAs) could help tackle these negative drawbacks through harmonizing carbon prices across countries. We model a two-stage game where Country A can choose whether to implement BAs in the first stage. In the second stage, producers from both countries compete over prices in Bertrand competition or over quantities in Cournot competition. Most analyses on BAs so far focus on carbon pricing in the form of carbon taxes. However, we observe that many governments achieve their mitigation targets by implementing a cap and trade system with some kind of free allocation of emission allowances. From the current global carbon pricing situation, we identify two conditions for the compliance with the WTO’s national treatment principle that have not been dealt with in detail in previous models: (i) the application of BAs in the form of a cap and trade system and (ii) accounting for free allocation of emission allowances. Our results show that irrespective of the competition type, BAs supplementing a cap and trade system with free allocation improve welfare if the competitive pressure is high.

Saving face and facing climate change: Are border adjustments a viable option to stop carbon leakage?

This article argues that imposing a carbon tariff on imports from the EU’s trading partners could deliver tangible climate results but would also provoke strong trade repercussions. Ideally, the implementation of the Paris Agreement remains the best solution for the planet. But ambitious domestic climate policy in the absence of an international commitment to reduce carbon emissions puts the EU at a competitive disadvantage. While continuing its leadership on climate action, the EU has addressed the threat of displacing its production and its emissions elsewhere by subsidising European industry with carbon credits, an approach which has had unconvincing results. Carbon border adjustments could be a controversial but better option.

Chances for negotiated Serbia-Kosovo deal are fading

Significance The Kosovan government imposed a 10% tariff on imports from Serbia and Bosnia-Hercegovina (BiH) on November 6, frustrated at their refusal to recognise Kosovo’s independence except on terms it sees as unacceptable. The move will not make Serbia back down but will increase pressure on Kosovo’s president to abandon discussions with his Serbian counterpart about border adjustments. Impacts In the short term, Kosovan consumers must bear the extra cost of imports from Serbia and BiH, mainly food and building materials. Trade could reroute elsewhere, increasing Kosovo’s separation from Serbia, unless Serbian exporters cut their prices to compensate. The impact on Serbia should be minor: exports to Kosovo at 400 million euros a year are just 3% of total goods exports. The EU will be irked at Prishtina’s failure to uphold good regional relations under its Stabilisation and Association Agreement.