Global Energy Subsidies Are Big—About US$5 Trillion Big

By Sanjeev Gupta and Michael Keen

(Versions in 中文, Français, 日本語Русский and Español)

In their blog, Ben Clements and Vitor Gaspar make the points that global energy subsidies are still very substantial, that there is a strong need for reform in many countries, and that now is a great time to do it. This blog sets out what we mean by “energy subsidies,” provides details on their estimation, and explains how they continue to be high despite the recent drop in international energy prices (Chart 1).

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Our latest update of global energy subsidies shows that “pre-tax” subsidies—which occur when people and businesses pay less than it costs to supply the energy—are smaller than a few years back. But “post-tax” subsidies—which add to pre-tax subsidies an amount that reflects the environmental, health and other damage that energy use causes and the benefit from favorable VAT or sales tax treatment—remain extremely high, and indeed are now well above our previous estimates.

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Can Japan Afford to Cut Its Corporate Tax?

By Ruud de Mooij and Ikuo Saito

(Versions in 日本語)

It is no surprise that, as part of its revised growth strategy presented in June, the Japanese government has announced it will reduce the corporate income tax rate. At more than 35 percent for most businesses, the Japanese rate is one of the highest among the industrialized countries of the Organization for Economic Cooperation and Development (see Chart 1). Moreover, at a time when Japan needs to boost economic growth, the corporate income tax rate is generally seen as the country’s most growth-distortive tax.

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Once And For All—Why Capital Levies Are Not The Answer

Mick Keen By Michael Keen

(Version in EspañolFrançais and  中文)

Holy grail

Last night, when you went to bed, you left $40 on the kitchen table. When you woke up this morning, you found only $30—and a note from the government saying, “Thank you very much, we took $10 as a tax payment.” This is, of course, extremely irritating. To an economist, however, it’s close to an ideal form of taxation, since there is nothing you can now do to reduce, avoid, or evade it—the holy grail of what economists call a non-distorting tax.

(This doesn’t mean that you won’t react in some way. Being worse off, you may now work a bit more, or save a bit less. But any other tax raising $1 would make you even worse off, because it would change relative prices (a tax on your earnings would make working less attractive, for instance), and so take your choices even further from those you would make in the absence of taxation.)

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