News brief – May 2006

OECD Observer

Inflation rising

Inflation rose in the OECD area in March. Consumer prices increased by 2.6% in the 12 months to March 2006, compared with 2.8% in the year to February 2006. On a monthly basis, the price level rose by 0.4% between February and March 2006 compared with 0.2% between January and February 2006.

The rise was due mainly to increases in food prices, up 1.4% year-on-year in March compared with 1.8% in February, and energy prices, which rose by 12.7% year-on-year in March compared with 14.5% in February.

See www.oecd.org/ctp/statistics.

Spanish bribery

Spain should rapidly amend its laws to ensure that companies can be found directly liable for bribing foreign public officials and sanctioned with serious fines, according to a new report by the OECD Working Group on Bribery.

The main recommendations encourage Spain to expand the applicable penalties on companies to include dissuasive fines, increase the penalties on bribery of foreign public officials to obtain favourable discretionary decisions, expand the definition of foreign bribery to include bribes composed of non-monetary benefits and to improve the flow of information to prosecutors and judges about possible foreign bribery by Spanish companies.

The latest review of Spain is the 24th country report out of 36 by the working group, part of Phase 2 evaluations, which look at the enforcement of the OECD Convention on Combating the Bribery of Foreign Public Officials in International Business Transactions in member countries.

The report also highlighted positive aspects of the fight against foreign bribery by Spanish companies and persons, including Spain’s recent decision to give its specialised anti-corruption prosecution service broader responsibilities with regard to the investigation and prosecution of foreign bribery cases. Spain recently improved its legislation regarding the confiscation of assets, including those related to foreign bribery.

For more on OECD reviews to combat bribery and corruption, visit www.oecd.org/corruption.

Unemployment stable

The OECD area unemployment rate remained unchanged from January to February, at 6.3%–a 0.5% decrease from a year earlier. The euro area rate, down 0.6% from a year ago, dipped 0.1% in February to 8.2%.

For more details, see www.oecd.org/std/labour.

Tax wedges shrink

When it comes to pay, there is a difference between net take-home pay of employees, including any cash benefits from government welfare programmes, and the total labour costs to the employer. That difference is called a tax wedge, and it has recently shrunk slightly in size in most OECD countries. According to the latest Taxing Wages, an annual publication, this trend partly reflects tax cuts as governments attempt to get more people into work. However, these cuts have been limited by the need to maintain budgets. Still, single earners without children on average wages in services and manufacturing faced an average tax wedge of 37.3% in 2005, down from 37.9% in 2000.

Taxing Wages shows Belgium, Germany and Hungary with the highest tax wedges for single persons on average earnings, while Korea, Mexico and New Zealand show the narrowest. For a single-earner married couple with two children on average earnings, Turkey (42.7%), Sweden (42.4%) and Poland (42.1%) have the biggest tax wedges. By contrast, Ireland (8.1%), Iceland (11%) and the US (11.9%) have the smallest tax wedges.

Excerpts from Taxing Wages are available at www.oecd.org/ctp/taxingwages.

Aid tops $100 billion

A new record was set in aid when Official Development Assistance (ODA) to developing countries from the OECD’s Development Assistance Committee (DAC) rose 31.4% to US$106.5 billion in 2005. This represents 0.33% of DAC members’ combined gross national income, up from 0.26% in 2004.

Much of the increase was in the form of debt relief grants–these rose by more than 400%– while other aid increased 8.7% in the same period. In 2005 OECD-DAC members, who account for around 90% of total bilateral assistance, provided debt forgiveness grants of nearly $14 billion to Iraq and a little over $5 billion to Nigeria. Further debt relief to Nigeria will be included in ODA figures in 2006 and to Iraq for the next three years, under existing Paris Club agreements. Still, ODA is expected to ease back in 2006-2007. The tsunami disaster in December 2004 was another factor behind the 2005 increase. DAC members provided about $2.2 billion in official assistance to the countries affected.

Visit www.oecd.org/dac

New pension guidelines

OECD governments have agreed to adopt new guidelines that create a standard for the effective, transparent management of pension funds. More than one million funds operate in OECD countries, holding more than US$16 trillion in assets at the end of 2005. Pension fund investment strategies are becoming more sophisticated and diverse as their importance continues to rise. The new guidelines act as a road map, calling on regulators to give pension funds more flexibility in their investment choices and on trustees to be more diligent in monitoring their fund’s investments.

They propose that funds follow the so-called “prudent person” rule, meaning that governments must define an overall investment policy and follow it; ensure that the governing body acts in the “best interest” of beneficiaries when investing plan assets; establish internal controls and procedures to effectively implement and monitor the way investments are managed; and identify, measure, monitor and manage the risks to which the fund is exposed. For example, the market value of the fund’s assets and liabilities should be disclosed on a regular basis to give trustees early warning in the case of any underperformance and enable them to take swift action. Another guideline is that legal provisions should not prohibit investment abroad by pension funds.

The full text of the guidelines is available at www.oecd.org/daf/pensions.

Spam alert

Governments and industry should step up their co-ordination to combat the global problem of spam, according to a new set of OECD recommendations. Governments recently approved a “Recommendation on Cross-Border Co-operation in the Enforcement of Laws against Spam”, urging countries to ensure that their laws enable enforcement authorities to share information with other countries and do so more quickly and effectively. The report further instructs governments to establish a single national contact point to facilitate international co-operation.

The report states that educating people on how to deal with spam is also important. Governments, working with industry, should run nationwide campaigns to raise awareness about spam and Internet security in schools and among senior citizens.

The new recommendations form part of the evolving Anti-Spam Toolkit that gives policymakers a comprehensive package of concrete regulatory approaches, technical solutions and industry initiatives to fight spam. It also includes a guide to best practices for Internet Service Providers and other network operators, and for email marketing. These tips were produced by the Business and Industry Advisory Committee to the OECD (BIAC), in co-operation with the Messaging Anti-Abuse Working Group (MAAWG), an organisation of Internet Service Providers. It is the first effort by the private sector to develop a series of common best practices at the international level.

Plus ça change…

“From the point of view of the individual, economic changes can, however, appear as both costly and troublesome. They may mean the abandonment of old skills, of security created by seniority rights or adherence to a social insurance scheme.”

From OECD Observer No 1, November 1962, p20.

©OECD Observer No 255, May 2006




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