OECD Observer
News brief– Q3 2012

Stop tax evasion; Greener tourism; Soundbites; New movement; Euro options; Better life yardstick; Economy; Country roundup; Outlook still fragile; Learning inequality; Plus ça change...

Stop tax evasion

The global clampdown on tax evasion, which was one of the silver linings to emerge from the dark cloud of the crisis, continues to make steady progress, according to reports presented to G20 leaders at their summit in Los Cabos, Mexico. A report by the Global Forum on Transparency and Exchange of Information for Tax Purposes says significant progress has been made since the last G20 Summit in Cannes in November 2011. The Global Forum has now launched a number of reviews to assess whether cross-borderexchange of information is being implemented effectively.

A supplementary report by the OECD shows that exchange of tax information among countries has been improving. The OECD also announced a new initiative to tackle the misuse of corporate vehicles such as shell companies. The work will tackle the issue of tax base erosion and profit shifting by some multinational firms. A progress report on the initiative will be presented to the next G20 Summit.

The Global Forum reports that more than 800 cross-border exchange of information agreements have now been signed. And since the Cannes Summit, four more countries–Colombia, Costa Rica, Greece and India–have signed a multilateral Convention to counter tax evasion. The number of signatory countries now stands at 35.

Visit www.oecd.org/tax/eoi

Greener tourism

Green innovation in tourism can drive sustainable development by reducing costs, boosting revenue, creating jobs and improving resource efficiency. This was a conclusion drawn by participants in a Rio+20 side event, “Green Innovation in Tourism” co-hosted by the OECD and tended by tourism experts from international organisations, United Nations agencies and the tourism public and private sector.

An increased focus on sustainability–in particular, green innovation–can lead to more jobs and reduce environmental impacts, cutting costs and increasing competitive advantages while enhancing the visitor experience.

But obstacles remain. Tourists are often unaware of green options or unwilling to pay more for a sustainable holiday experience. Also, businesses misperceptions about investment costs, a lack of funding for micro and medium sized firms, and poor policy coordination among sectors such as tourism, transport, energy and environment also halt progress.

Visit www.oecd.org/cfe/tourism


New movement

“Immigrants are crucial to innovation, study says.”

Headline in The New York Times, 25 June 2012

Euro options

“The marriage may have been foolish. But a divorce would be terrifying.”

Martin Wolf, Financial Times, 19 June 2012

“Just like in good story books, the hero will win the day. The euro will survive, much to the displeasure of the Anglo-Saxon press which has been pronouncing the death of the single currency for over two years.”

Alain Frachon, Le Monde, June 2012

Better life yardstick

“The OECD [Better Life Index] rankings offer encouragement to the idea that social well-being can be measured, and should be a legitimate goal of government.”

Editorial, The Boston Globe, 4 June 2012


Quarterly GDP in the G20 area grew by 0.8% in the first quarter of 2012, up from 0.7% in the previous quarter, according to preliminary estimates. This small pick-up in aggregate G20 GDP growth still masks diverging patterns among the world’s largest economies. Growth accelerated in the first quarter of 2012 in Australia, Germany, Japan, Korea, and Mexico, while it slowed or remained stable in all other G20 economies. Growth in China decelerated by 1.8%, slowed in India, Indonesia and South Africa, and continued to contract in Italy and the UK.

Composite leading indicators from the OECD, which are designed to anticipate turning points in economic activity, continue to point to divergence between economies. The leading indicators for Japan, the US and Russia continue to signal improvements in economic activity, while they continue to point to sluggish economic activity in France and Italy.

Annual inflation in the OECD area slowed to 2.5% in the year to April 2012, compared with 2.7% in the year to March 2012. This slowdown in the annual rate of inflation mainly reflected developments in energy prices. Excluding food and energy, the annual inflation rate was broadly stable at 2.0% in April.

The OECD area unemployment rate was unchanged at 7.9% in April 2012, around the same level recorded since January 2011. The rate for the Euro area was unchanged at 11.0% in April, while it grew by 0.1 percentage point in the US to 8.2%, interrupting the decline recorded since August 2011.

Unit labour costs in the OECD area rose by 0.3 % in the first quarter of 2012, the same rate as in the previous quarter, according to early estimates.

Merchandise trade grew moderately in most major economies in the first quarter of 2012. Total imports and exports of G7 and BRICS countries grew by 1.0% and 0.6% respectively. In contrast, trade slowed sharply in China, with exports contracting (by 4.2%) for the second consecutive quarter and imports contracting (by 3.8%) for the first time since the first quarter of 2009.

Visit www.oecd.org/statistics

Country roundup

From 2001 to 2010, Canada doubled its aid. But from 2010 to 2011, aid fell by just over 5% and the recent federal budget cuts off another 7%, according to the OECD’s Review of the Development Co-operation Policies and Programmes of Canada. The review highlights the country’s strong stand on human rights and effective efforts in Afghanistan and Haiti, but recommendsthat Canada increase aid to meet theinternational target of 0.7% of gross national income.

Germany is successfully limiting the amount of carbon, energy and resources needed to grow its economy while stringent environmental requirements have helped to turn the country into a leader in the environmental goods and services sector. Yet challenges remain in areas like air and water quality, the protection of biodiversity, and de-carbonising energy production, according to the OECD’s Environmental Performance Review of Germany.

More than 12 years after making foreign bribery a crime, Sweden needs to make much greater efforts to actively enforce its anti-bribery legislation, according to a new OECD report. Despite a number of allegations against Swedish companies, the country has prosecuted only one case in 2004 and has never proceeded against a company for foreign bribery. Meanwhile, a similar report finds that Greece has failed to promptly investigate a significant foreign bribery case and to provide timely information on its anti-bribery efforts.

Colombia and Mexico are a step closer to benefiting from cross-border tax co-operation and information sharing. Colombia has signed, and Mexico has deposited its instrument of ratification for the OECD and Council of Europe’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

Slovenia’s rich and diverse environment is under pressure from the country’s expanding economy, according to OECD’s first Environmental Performance Review of Slovenia. Green tax reform, better use of public and private finance, and more vigorous promotion of eco-innovation, could help Slovenia green its growth as well as boost productivity and competitiveness and improve its fiscal position.

Visit www.oecd.org/newsroom

Outlook still fragile

The global economy is gradually gaining momentum, but the recovery is fragile, extremely uneven across different regions and could be derailed by the crisis in the euro area, according to the latest OECD Economic Outlook released in May. GDP growth across the OECD is projected to slow from an annual rate of 1.8% in 2011 to 1.6% in 2012, before recovering to 2.2% in 2013.

Activity remains strong in most emerging-market economies, but policy challenges vary, with inflation acting as a drag on real incomes in some, while it remains subdued in others.

In Europe, recovery in the healthier economies is not strong enough to offset flat or negative growth elsewhere on the continent. Here weak competitiveness must be addressed in those countries with large external deficits, while structural adjustment and higher wages in surplus countries would contribute to a growth-friendly rebalancing process.

Visit www.oecd.org/economy

Learning inequality

The US should do more to foster innovation and provide more equitable access to high-quality education in order to maintain its status as the world’s most vibrant and productive economy, according to OECD’s latest Economic Survey ofthe United States. Data from the survey suggests the US is losing its cutting edge in innovation.

Visit www.oecd.org/us

Plus ça change...

“In spite of such unquestionable assets, the small industrial firm is perhaps in greater danger now than ever before. Some of the threatening forces at work are particularly striking because they are the result of current economic trends: the acceleration of technological change, for instance, and the advent of huge international markets.”

“Among the business giants, can small industries survive?” in issue No 1, November 1962

©OECD Observer No 292, Q3 2012