Tax officials and experts grappled with the issue of tax treaties several weeks ago at the IMF-World Bank Annual Meetings. This arcane subject has now emerged as a new lightning rod in the debate on fairness in international taxation. As citizens demand that corporations pay their fair share of taxes and some governments struggle to raise enough revenues for basic services, tax treaties present difficult issues.
The sharp and persistent rise in unemployment in advanced economies since the 2008-09 financial crisis is a hotly debated policy issue. Rightly so: High persistent unemployment has major human and economic costs, from loss of morale to loss of skills. More broadly, it seems to undermine the very fabric of society. An IMF conference explores how to revive labor markets.
I went to two areas around Sendai—the first was the Arahama Elementary School, site of a successful evacuation during the disaster. The school is still in its wrecked state—just as it was straight after the tsunami struck. Debris is strewn all over the grounds–a mangled mass of vehicles resembling more a scrap yard than a school. The corridors and classrooms inside are also in ruins.
The new issue of Finance & Development magazine looks at different aspects of interconnectedness. Kishore Mahbubani, dean of the National University of Singapore’s Lee Kuan Yew School of Public Policy, argues that what he terms the global village increasingly requires global solutions to big emerging problems such as climate change. Kemal Derviş, former head of the United Nations Development Programme who is now a vice president at the Brookings Institution, looks at three fundamental shifts in the global economy that are leading to major adjustments in the balance between east and west.
In emerging Europe, the share of loans classified as nonperforming—many of them household mortgages—have exploded from 3 percent before the crisis to 13 percent at the peak. NPLs in some parts of the Baltics and Balkans are already at par with previous financial crises elsewhere. Our analysis finds evidence that nonperforming loans are indeed a serious drag on credit supply and economic growth. They drive up banks’ funding costs and interest margins, and at the same time drain their profits and capital. On the credit demand side, over-extended households and businesses are reluctant to consume and invest.
Following the G-20’s renewed commitment in Toronto to a comprehensive reform agenda, policymakers must seize the moment to follow through with an ambitious set of plans to reform the global financial system. The IMF’s Financial Counsellor, José Viñals, says action must be taken soon in five key areas: (1) the micro -prudential and macro-prudential dimensions of financial reform, (2) regulation of nonbank financial institutions, (3) core rules governing capital and liquidity levels, (4) consistency of national and international regulations, and (5) reform of supervision.