News brief– Q3 2014

OECD Observer

©OECD/Michael Dean

Information exchange against tax evasion endorsed

The new OECD/G20 standard on automatic exchange of information was endorsed by all OECD and G20 countries in Berlin on 29 October. A status report on committed and not committed jurisdictions will be presented to G20 leaders during their annual summit in Brisbane, Australia on November 15-16.

Fifty-one jurisdictions translated their commitments into action during a massive signing of a Multilateral Competent Authority Agreement that will activate the automatic exchange of information, starting as soon as September 2017. They agreed to establish a reporting process based on peer reviews to ensure effective implementation of automatic exchange. Developing countries were invited to join the endeavour, with an initiative launched to raise awareness in Africa.

“We are making concrete progress toward the G20 objective of winning the fight against tax evasion,” OECD Secretary-General Angel Gurría said, announcing the breakthrough in Berlin. www.oecd.org/tax/transparency

The good old days

Henri Cartier-Bresson exhibition at Shanghai
2005 ©Liu Jin/AFP

People’s well-being has improved around the world since the early 20th century, and more than just incomes per head, according to new research. How Was Life? Global Well-Being since 1820 shows that, with the exception of sub-Saharan Africa, countries have generally become more equal with each other in terms of well-being, but the record in terms of income inequality is less impressive. Income inequality fell from the late 1800s until around 1970, but then began to rise markedly.

Nevertheless, people are generally much better off than they were in the past: wages of manual workers globally have increased some eight-fold in real terms since 1820, while GDP per capita has risen 10 fold.

To find out more about how life was in your country, visit the interactive website at: http://gitvfd.github.io/How-was-life


Economy

GDP in the OECD area grew by 0.4% in the second quarter of 2014, up from 0.2% in the previous quarter. Stockbuilding was the main contributor, with 0.3 percentage points. Geographically, growth rebounded to 1% in the US, following a contraction of 0.5%, and remained relatively strong in the UK at 0.8%. Growth contracted by 1.7% in Japan and 0.2% in Italy, while remaining flat in France. In the EU growth fell from 0.2% to 0.1%.

Meanwhile, the OECD’s composite leading indicators for October, which anticipate turning points in activity, point to a mixed outlook, with weakening growth in the euro area and stable growth elsewhere.

OECD-area inflation rose by 1.8% in the year to August 2014, compared with 1.9% in July. Excluding food and energy, the OECD annual inflation rate was stable in August, at 1.9% for the fourth consecutive month.

Unit labour costs in the OECD area rose by 0.5% in the second quarter of 2014. In the US, labour costs slowed from 2.3% to 0.1% quarter-on-quarter, while in the euro area they rose by 0.4%, as labour productivity fell to -0.2% for the first time since 2012.

Click to enlarge

Merchandise trade was stable across the world’s major economies during the second quarter of 2014, with exports rising 1.5% and imports falling 0.8%. There were divergent patterns across countries. In Canada imports and exports rose by 4.9% and 4.7%, by 2.7% and 2.2% in the US and by 1.1% and 0.4% in the UK. An import decline of 4.1% outpaced an export growth of 2.9% in China. In Japan, both imports and exports fell by 7.8% and 0.5%, respectively.

The unemployment rate in the OECD area stood at 7.3% in August 2014, down 0.1% from the previous month. Some 44.4 million people were out of work, 5.5 million less than at the peak in April 2010. The unemployment rate was stable in the euro area, at 11.5%, but fell by 0.3 percentage points in Italy to 12.3%. There was also a 0.3 percentage point decrease in Australia to 6.1%.

For latest updates on economic statistics, see www.oecd.org/std/statisticsnewsreleases.htm.


Soundbites

Lawn-term water planning

In Nevada, Las Vegas has paid out $200 million over the last decade for homes and businesses to pull out their lawns. It will get worse.

–Eduardo Porter, International New York Times, 16 October 2014

Dim perspectives

Progress is not a straight line. It’s a permanent zigzag, and there is no utopia at the end of the rainbow.

–Robert J. Samuelson, in Charleston Daily Mail, 9 October 2014

All of the policies introduced in Europe have led to worsening public finances.

–Joseph Stiglitz, in Le Monde, 8 October (our translation)

“This was pretty much as we’d expected: bad. There's basically minuses in everything–private consumption down 5%, housing with a double-digit drop, and capex [capital expenditure] is also down.”

–Yuichi Kodama, economist at Meiji Yasuda Life Insurance, via Reuters, 13 August 2014

“We have a lot to worry about, whether it’s the crisis in Ukraine, developments in Gaza or the outbreak of Ebola.”

–Makoto Kikuchi, Chief Executive of Myojo Asset Management, via Reuters, 13 August


Country roundup

Turkey should rebalance growth through monetary and financial policies that keep inflation, exchange rates and credit levels on sustainable paths, according to the latest OECD Economic Survey of Turkey 2014. www.oecd.org/turkey/

Italy should step up its efforts to help immigrants and their children integrate into society and learn the skills they need to improve their job prospects and earnings, according to Jobs for Immigrants: Labour market integration in Italy. www.oecd.org/italy

France needs to push on with full implementation of the structural reforms it adopted as they would boost potential annual economic growth by one third, or 0.4 percentage points per year over ten years, according to Structural reforms in France: Impact on growth and options for the future. www.oecd.org/france

©OECD/Michael Dean

President Hollande meets IGO chiefs at the OECD
French president, François Hollande, visited the OECD
on 17 October for economic discussions with the heads of major international governmental organisations, hosted by the OECD Secretary-General, Angel Gurría. From left to right are Guy Ryder of the International Labour Organisation, Jim Yong Kim of the World Bank, President Hollande, OECD Secretary-General Gurría, Christine Lagarde of the International Monetary Fund, and Roberto Azevêdo of the World Trade Organization. For more on the meeting, see http://oe.cd/KL.

Action taken by many European countries to return their public finances to health are beginning to pay off but continued effort is needed, as joblessness remains high, and youth unemployment in some countries has risen above 30%. www.oecd.org/eu/

On 13 October Monaco committed to strengthen international tax co-operation, thereby becoming the 84th jurisdiction participating in the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. www.oecd.org/countries/monaco/

Brazil must build on the positive momentum started with its new Corporate Liability Law and its first indictments in one foreign bribery case to investigate and prosecute more proactively foreign bribery, says the OECD Working Group on Bribery. http://www.oecd.org/brazil/

To ensure a sustained recovery Spain must fully implement on-going structural reforms, as well as further measures to improve productivity and competitiveness, according to the latest OECD Economic Survey of Spain 2014. www.oecd.org/spain/

Iceland must balance growth in power and tourism industries with nature conservation, according to the new OECD Environmental Performance Review of Iceland 2014. www.oecd.org/iceland/


Regional inequality widens 

Living standards continue to diverge within many economically advanced countries as poorer regions struggle to catch up with richer ones, a new report says. In fact, half of the 34 OECD countries have seen the income gap between their best-off and worst-off regions widen since the 2008 crisis.

The OECD Regional Outlook 2014 shows that for 10 OECD countries, over 40% of the national rise in unemployment since the crisis was concentrated in one region, with some of the starkest inequalities showing up in big cities. See http://oe.cd/IS

Company cars exhaust taxes

Advanced economies are pushing up carbon emissions and pollution by under-taxing company cars, according to new OECD research. The study finds that this amounts to an average annual subsidy per car of €1,600, ranging from just €57 in Canada to €2,763 in Belgium, and the total cost across the 28 countries examined is estimated at €26.8 billion of foregone tax revenues for 2012. http://oe.cd/KI

Ebola watch

A new webpage has been opened to help understand and monitor progress in addressing the Ebola virus outbreak which has struck western Africa and preoccupied global public opinion in recent months. Run by the Sahel and West Africa Club at the OECD, the website looks at the history and geographical concentration of the outbreak, the cross-border challenges, the international response and political initiatives, and a list of references for further reading: www.oecd.org/swac/ebola.htm


Plus ça change…

“For the first time the employment situation of young people places them in the category of disadvantaged persons – along with immigrants, women, elderly workers, ethnic minorities, etc.”

“The problem of young people’s entry into working life” in Issue No 77, September-October 1975.


©OECD Observer No 300, Q3 2014 




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