The European Commission has today adopted a Communication on Business Taxation for the 21st century to promote a robust, efficient and fair business tax system in the European Union. It sets out both a long-term and short-term vision to support Europe’s recovery from the COVID-19 pandemic and to ensure adequate public revenues over the coming years. It aims to create an equitable and stable business environment, which can boost sustainable and job-rich growth in the EU and increase our open strategic autonomy. The Communication takes account of the progress made in the G20/OECD discussions on global tax reform.
First, the Commission will present by 2023 a new framework for business taxation in the EU, which will reduce administrative burdens, remove tax obstacles and create a more business-friendly environment in the Single Market. The “Business in Europe: Framework for Income Taxation” (or BEFIT) will provide a single corporate tax rulebook for the EU, providing for fairer allocation of taxing rights between Member States. BEFIT will cut red tape, reduce compliance costs, minimise tax avoidance opportunities and support EU jobs and investment in the Single Market. BEFIT will replace the pending proposal for a Common Consolidated Corporate Tax Base, which will be withdrawn. The Commission will launch a broader reflection on the future of taxation in the EU, which will culminate in a Tax Symposium on the “EU tax mix on the road to 2050” in 2022.
Second, today’s Communication also defines a  tax agenda for the next two years, with measures that promote productive investment and entrepreneurship, better safeguard national revenues, and support the green and digital transitions. This builds on the ambitious roadmap set out in the Tax Action Plan, presented by the Commission last summer.  Measures will include:

Ensuring greater public transparency by proposing that certain large companies operating in the EU publish their effective tax rates. The abusive use of shell companies will also be tackled through new anti-tax avoidance measures;
Supporting the recovery by addressing the debt-equity bias in the current corporate taxation, which treats debt financing of companies more favourably than equity financing. This proposal will aim to encourage companies to finance their activities through equity rather than turning to debt.

Third, the Commission has adopted today a Recommendation on the domestic treatment of losses. The Recommendation prompts Member States to allow loss carry-back for businesses to at least the previous fiscal year. This will benefit businesses that were profitable in the years before the pandemic, allowing them to offset their 2020 and 2021 losses against the taxes they paid before 2020. This measure will particularly benefit SMEs.
Background
Today’s Communication is part of a wider EU tax reform agenda for the coming years. In addition to the corporate tax reforms set out in the Communication, the Commission will soon present measures to ensure fair taxation in the digital economy. The Commission will propose a digital levy, which will serve as an EU own resource. The Commission will also soon come forward with a review of the Energy Taxation Directive and the Carbon Border Adjustment Mechanism (CBAM), in the context of the “FitFor55” package and European Green Deal.
Members of the College said:
Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People, said: “Taxation needs to keep up to speed with our evolving economies and priorities. Our tax rules should support an inclusive recovery, be transparent and close the door on tax avoidance. They should also be efficient for businesses big and small. Today’s Communication will set the foundations for a corporate tax system in Europe that is fit for the 21st century, helping us to build a fairer and more sustainable society.”
Paolo Gentiloni, Commissioner for Economy, said, “It’s time to rethink taxation in Europe. As our economies transition to a new growth model supported by NextGenerationEU, so too must our tax systems adapt to the priorities of the 21st century. The renewal of the transatlantic relationship offers an opportunity to make decisive progress towards a global tax reform. We must work to seize that opportunity, while ensuring that an international agreement protects Europe’s key interests. Today we set out how a global deal will be implemented in the EU – and the other steps we will take over the coming three years to increase tax transparency and help businesses small and large to recover, grow and invest.”
Compliments of the European Commission.
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The European External Action Service (EEAS), in cooperation with the Portuguese Presidency of the Council of the European Union and the European Union Institute for Security Studies (EUISS), held a scenario-based discussion with EU Member States and international partners on 17 May 2021. The discussion, the first of its kind, focused on how to address international security challenges related to cyberspace.
All EU Member States, Australia, Canada, Japan, Mexico, New Zealand, Norway, Singapore, Republic of South Korea, Switzerland, United Kingdom and United States participated in the discussion. The aim of the scenario-based discussion was to improve the mutual understanding of the respective diplomatic approaches to prevent, discourage, deter and respond to malicious cyber activities, and to identify opportunities for further strengthening international cooperation to this end.
The discussions were based on a scenario in which a territory of a fictitious EU Member State and a partner country were subjected to malicious cyber activities, affecting a broader international community. The exchanges underlined the potential impact of the misuse of information and communication technologies (ICTs) on our security, economy and society at large, how an event in one country could have an immediate impact across the globe, and how diplomatic means that are clear, transparent and consistent with international law could contribute to conflict prevention, cooperation and stability in cyberspace.
It demonstrated the need to enhance diplomatic cooperation and to continue to strengthen cyber diplomacy expertise to advance a global, open, stable and secure cyberspace, respecting human rights and fundamental freedoms and the rules-based order, grounded in the application of existing international law in cyberspace and the adherence to the norms, rules and principles of responsible state behaviour.
The scenario-based discussion marks an important milestone towards closer international cooperation in promoting security and stability in cyberspace, as part of the 2020 EU Cybersecurity Strategy.
Director Joanneke Balfoort, responsible for Security and Defence Policy, represented the EEAS.
Compliments of the Delegation of the United States to the European Union.
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Thinking about adding cryptocurrency to your investment portfolio? The number of Americans investing in cryptocurrency has increased. But as a new FTC Consumer Protection Data Spotlight suggests, the number who report getting stung by cryptocurrency investment scams has skyrocketed. You’ll want to read the Data Spotlight in detail, but here are five facts that suggests caution before sinking your savings into cryptocurrency.

Consumers report losing millions to cryptocurrency scams. Since October 2020, nearly 7,000 consumers have reported losses to cryptocurrency scams totaling more than $80 million with a reported median loss of $1,900. Compared to the same period a year earlier, that’s about 12 times the number of reports and nearly 1,000% more in reported losses.

Cryptocurrency scammers blend into the scene. Cryptocurrency enthusiasts tend to congregate online to talk about their shared interest. But reports from defrauded consumers suggest that some sites can raise concerns. Is the author of that post just a friendly person sharing an investment “tip” or is he or she part of a ploy to draw consumers into a scam? Prospective investors also need to take supposed “success stories” from endorsers with a hearty helping of salt. There’s no way to verify they’re telling the truth.

A celebrity’s name is no guarantee of legitimacy. Crypto crooks may try to cover their con by stealing the name of a newsmaker or business leader – for example, by falsely claiming the celebrity will “multiply” the cryptocurrency a consumer sends. Case in point: In just the past six months, people have reportedly sent more than $2 million in cryptocurrency to Elon Musk impersonators.

(Cyber) romance and (crypto) finance can be a combustible combination. Fraudsters have been known to use the artifice of long-distance love to gain a person’s trust only to reel them into a cryptocurrency investment scam. According to the Data Spotlight, about 20% of the money people reported losing through romance scams since October 2020 was sent in the form of cryptocurrency – and many of them thought they were making an investment recommended by their supposed sweetheart.

Younger investors may be at particular risk. Since October 2020, people between 20 and 49 were over five times more likely to report losing money to cryptocurrency investment scams than older consumers. What’s more, those in their 20s and 30s reported losing far more money on investment scams than on any other type of fraud – and more than half of their reported investment scam losses were in cryptocurrency. But that doesn’t mean that consumers over 50 weren’t affected, too. Members of that age group were far less likely to report losing money on cryptocurrency investment scams. However, when they did lose money, their individual losses were higher, with a reported median loss of $3,250.

Even sophisticated business people have been taken in by cryptocurrency investment scams and the Data Spotlight has specific tips on protecting yourself. For more information about cryptocurrency scams, visit ftc.gov/cryptocurrency. If you spot a scam, report it to us at ReportFraud.ftc.gov.
Compliments of the U.S. Federal Trade Commission.
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What is the blue economy and how is it contributing to the overall economy?
The blue economy encompasses all industries and sectors related to oceans, seas and coasts, whether they are based in the marine environment (e.g. shipping, fisheries, energy generation) or on land (e.g. ports, shipyards, land-based aquaculture and algae production, coastal tourism).
It is a broad, fast-moving segment of our economy, where over the past decade significant steps have been taken to modernise and diversify. Alongside traditional sectors, innovative sectors are evolving and growing – such as ocean renewable energy, blue bio-economy, bio-technology and desalination – thus providing new prospects and creating jobs. The blue economy is also connected to the on-land economy through a web of spin-offs and supply chains.
According to the most recent figures by the 2020 Blue economy report, the EU blue economy directly employed close to 4.5 million people and generated around €650 billion in turnover and €176 billion in gross value added in 2018.
Under a sustainable blue economy, maritime and coastal activities reconcile economic development, improved livelihoods and social inclusion with fighting the climate crisis, protecting biodiversity and ecosystems, using resources responsibly and achieving the zero-pollution ambition.
How can the blue economy contribute to the European Green Deal?
With more sustainable models, the blue economy will use the oceans’ resources to contribute to achieving the goals of the European Green Deal of a more resilient and climate-neutral European economy. This includes:

a 90% reduction of greenhouse gas emissions from maritime transport, which accounts for more than 80% of global trade in terms of volume.

Decarbonising maritime transport (as well as fishing operations) will decrease greenhouse gas emissions, as well as air and water pollution and underwater noise.
Under the Fit for 55 package, the Commission will propose a series of legislative measures to incentivise the deployment of renewable / low carbon fuels and onshore power supply in ports.

minimising the environmental impacts of fishing on marine habitats with measures such as specifications for fishing gear and mesh sizes, closed areas and seasons. The Commission is now preparing a report on the implementation of these measures and will publish a new action plan with the aim of further reconciling fishing – including bottom-contact fishing – with biodiversity goals.
turning blue economy sectors more circular. For the recycling of large ships, the EU has a unique and ambitious set of standards in the Ship Recycling Regulation, that the Commission plans to revise by 2023 to possibly extend its scope and reinforce the existing regime.
expanding offshore renewable energy, which could generate a quarter of the EU’s electricity in 2050. To speed up its development, in 2020 the Commission published a new EU offshore renewable energy strategy that aims to multiply five-fold the capacity for offshore renewable energy by 2030 and 30-fold by 2050.
contributing to the transition towards a sustainable, low-carbon food system in line with the EU farm-to-fork strategy, including through developing and promoting low-impact aquaculture (such as low-trophic, multi-trophic and organic aquaculture). The new strategic guidelines for EU aquaculture set out the vision and an operational path to achieving this transformation. In 2022, the Commission will also table an initiative on algae to support the development of this innovative sector, which has the potential to become a significant source of low-carbon alternative food and feed materials. Moreover, a forthcoming initiatives will set new marketing standards to improve consumer information on the environmental and social sustainability of seafood and its carbon footprint.

developing nature-based solutions to adapt to sea level rise, depollute areas or fight eutrophication.

How can a sustainable blue economy contribute to a green recovery?
Innovative technologies such as big data, artificial intelligence, advanced modelling, sophisticated sensors and autonomous systems are likely to transform the blue economy in the immediate future.
The EU must be at the forefront of these changes and exploit its own strengths. Shipyards need to get ready to produce zero emission vessels. As the current leader in the production of wind, wave and tidal energy and the largest maritime space in the world, the EU is uniquely placed to develop offshore renewable energy.
The EU imports 65% of its seafood, thus there is a real market for more food and feed production from the sea, especially from low-impact aquaculture.
Transitioning to a sustainable blue economy is also about resilience. Maritime and coastal tourism accounts for 60% of the employment in the blue economy. Over half of the EU’s tourist accommodation establishments are located in coastal areas and 30% of overnight stays are at beach resorts.  This sector has suffered severe effects from the pandemic. We must learn from this crisis and rebuild a more resilient system. Following the Covid-19 outbreak, the Communication has adopted a series of initiatives to re-enable safe tourism and pave the way for a more resilient and sustainable sector. The Commission is also preparing a guide on the many funding opportunities available.
A sustainable blue economy can create many attractive jobs. Between 2017 and 2018, employment in marine renewable energy (offshore wind) has increased by 15% and it could triple by 2030. The Commission will support industry and vocational training institutes to bridge the skills gaps and prepare qualified workforce.
How will the EU finance the transition?
Member States and coastal regions should make use of the different tools and funds at their disposal to transition to a sustainable blue economy, notably through the the European Maritime, Fisheries and Aquaculture Fund or recovery funds.
The European Commission and the European Investment Bank will align efforts to reduce pollution in European seas, especially in affected water bodies such as the Mediterranean Sea. Both sides will cooperate on  a comprehensive market study and on building a pipeline of investable projects for pollution avoidance and reduction, such as, biodegradability, recycling and re-use along the entire plastic value chain. On that basis, both sides will consider appropriate solutions to increase access to financing, including through risk reduction facilities, provision of equity or loans, grants, all aimed at incentivizing private and public financiers to provide additional liquidity to such projects.
The European Commission will also cooperate with the European Investment Fund to explore a framework that would facilitate the use of shared management financial instruments for a sustainable blue economy.
Sustainability principles should be mainstreamed into all investment decisions, including corporate ones. The revision of the EU taxonomy is relevant in this respect. In addition, the Commission and the European Investment Bank (EIB) will continue to advocate for sustainable blue economy finance principles with private investors, which will create tangible opportunities for new jobs and businesses. To address the specific needs of blue economy SMEs, the Commission’s BlueInvest Platform provides them with customised support, visibility, access to investors and investment-readiness advice. The BlueInvest equity fund will combine financial contributions from the EU budget with private venture capital to finance blue tech start-ups. 
What will change following this Communication?
Ocean and seas are subject to cumulative impacts from human activities, and those impacts know no borders borders. A system managing each sector independently and allowing sectors to ignore each other is therefore inadequate. We need one single concept – that of sustainability – that must apply across sectors and across borders.
There are several areas of the maritime economy that can benefit from such a coordinated approach:

The space available for maritime activities is limited and solutions therefore need to allow fishing and energy generation, transport and tourism to co-exist and even benefit from each other’s presence. The Blue Forum will allow such dialogue for operators so that they can create synergies, reconcile competitive uses and reduce the impact of activities on habitats while leaving space for nature to run its course undisturbed.
To adapt to the challenges of our time, the EU blue economy needs to be innovative. The Communication proposes to better coordinate data collection and improve forecasting and modelling to allow for better knowledge of oceans dynamics and a better understanding of the impact of activities at sea. The candidate Horizon 2020 Mission on oceans will mobilize all players, including citizens, towards common purposes such as finding solutions to plastic pollution, coastal erosion or biodiversity loss.
EU countries share the seas also with non-EU countries. They need to join forces on common issues that could never be tackled by individual countries. The EU will continue to develop tailored strategies for each European sea basin and extend the same cooperative approach to neighbouring countries that share with the EU a basin, marine living resources and geo-economic features.
Security is essential to every economic activity, but control in the open seas is costly – even more so if each Member State and each authority, from civil protection to navy, has to do it on its own. Sharing information, which is the object of the Common Information Sharing Environment for the maritime domain (CISE), will allow Member States’ authorities to access a multitude of data, carry out common analyses and share human and physical resources (such as vessels and aircrafts).

To facilitate and accelerate the transition towards a sustainable blue economy, the communication announces a series of legislative and voluntary initiatives to be rolled out over the coming years with the support of EU funds. These include strengthening vocational training and education in blue skills to address workforce needs, fostering more resilient and sustainable forms of marine and coastal tourism, facilitating market access for innovative marine products such as algae and improving consumer information on the environmental and social sustainability of seafood and on its carbon footprint. The purpose of the Communication is to lay a foundation on which to build the initiatives of the next few years, including initiatives that are not yet planned. The European Commission will be working closely with the Member States and regions, so that Europe can move ‘as one’ towards sustainability.
Compliments of the European Commission.
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European Commission Executive Vice-President Valdis Dombrovskis, United States Trade Representative Katherine Tai and U.S. Secretary of Commerce Gina M. Raimondo today announced the start of discussions to address global steel and aluminum excess capacity. During a virtual meeting last week, the leaders acknowledged the need for effective solutions that preserve our critical industries, and agreed to chart a path that ends the WTO disputes following the U.S. application of tariffs on imports from the EU under section 232.
Executive Vice-President Dombrovskis, Ambassador Tai, and Secretary Raimondo acknowledged the impact on their industries stemming from global excess capacity driven largely by third parties.  The distortions that result from this excess capacity pose a serious threat to the market-oriented EU and U.S. steel and aluminum industries and the workers in those industries.  They agreed that, as the United States and EU Member States are allies and partners, sharing similar national security interests as democratic, market economies, they can partner to promote high standards, address shared concerns, and hold countries like China that support trade-distorting policies to account.
They agreed to enter into discussions on the mutual resolution of concerns in this area that addresses steel and aluminum excess capacity and the deployment of effective solutions, including appropriate trade measures, to preserve our critical industries.  To ensure the most constructive environment for these joint efforts, they agreed to avoid changes on these issues that negatively affect bilateral trade.   They committed to engaging in these discussions expeditiously to find solutions before the end of the year that will demonstrate how the U.S. and EU can address excess capacity, ensure the long-term viability of our steel and aluminum industries, and strengthen our democratic alliance.
Joint European Union-United States Statement
Compliments of the European Commission.
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Today, the European Commission is proposing a new approach for a sustainable blue economy in the EU for the industries and sectors related to oceans, seas and coasts.  A sustainable blue economy is essential to achieving the objectives of the European Green Deal and ensuring a green and inclusive recovery from the pandemic.
Frans Timmermans, Executive Vice-President for the Green Deal said: “Healthy oceans are a precondition for a thriving blue economy. Pollution, overfishing and habitat destruction, coupled with the effects of the climate crisis, all threaten the rich marine biodiversity that the blue economy depends on. We must change tack and develop a sustainable blue economy where environmental protection and economic activities go hand in hand.”   
Virginijus Sinkevičius, Commissioner for the Environment, Fisheries and Maritime Affairs said: “The pandemic has hit the marine economy sectors in different, but profound ways. We have an opportunity to start afresh, and we want to make sure that the recovery shifts the focus from mere exploitation to sustainability and resilience. Thus to be truly green, we must also think blue.”
All blue economy sectors including fisheries, aquaculture, coastal tourism, maritime transport, port activities and shipbuilding will have to reduce their environmental and climate impact. Tackling the climate and biodiversity crises requires healthy seas and a sustainable use of their resources to create alternatives to fossil fuels and traditional food production.
Transitioning to a sustainable blue economy requires investing in innovative technologies. Wave- and tidal energy, algae production, development of innovative fishing gear or restoration of marine ecosystems will create new green jobs and businesses in the blue economy.
The Communication sets out a detailed agenda for the blue economy to:

Achieve the objectives of climate neutrality and zero pollution notably by developing offshore renewable energy, by decarbonising maritime transport and by greening ports. A sustainable ocean energy mix including floating wind, thermal, wave and tidal energy could generate a quarter of the EU’s electricity in 2050. Ports are crucial to the connectivity and the economy of Europe’s regions and countries and could be used as energy hubs.

Switch to a circular economy and reduce pollution – including through renewed standards for fishing gear design, for ship recycling, and for decommissioning of offshore platforms and action to reduce plastics and microplastics pollution.

Preserve biodiversity and invest in nature – protecting 30% of the EU’s sea area will reverse biodiversity loss, increase fish stocks, contribute to climate mitigation and resilience, and generate significant financial and social benefits. Environmental impacts of fishing on marine habitats will be further minimised.

Support climate adaptation and coastal resilience – adaptation activities, such as developing green infrastructure in coastal areas and protecting coastlines from the risk of erosion and flooding will help preserve biodiversity and landscapes, while benefitting tourism and the coastal economy.

Ensure sustainable food production – sustainable production of and new marketing standards for seafood, use of algae and seagrass, stronger fisheries control as well as research and innovation in cell-based seafood will help to preserve Europe’s seas. With the EU sustainable aquaculture strategic guidelines now also adopted, the Commission has also committed to growing sustainable aquaculture in the EU.

Improve management of space at sea – the new Blue Forum for users of the sea to coordinate a dialogue between offshore operators, stakeholders and scientists engaged in fisheries, aquaculture, shipping, tourism, renewable energy and other activities will stimulate cooperative exchange for the sustainable use of marine environment. A report on the implementation of the EU Directive on Maritime Spatial Planning will be issued in 2022, following the adoption of national maritime spatial plans in March 2021.

The Commission will also continue creating the conditions for a sustainable blue economy internationally following the international ocean governance agenda.
Financing the sustainable blue economy
The European Commission and the European Investment Bank Group, composed of the European Investment Bank and the European Investment Fund (EIF) will increase their cooperation on a sustainable blue economy. The institutions will work jointly with Member States to meet existing financing needs to reduce pollution in European seas and support investment for blue innovation and blue bioeconomy.
The new European Maritime, Fisheries and Aquaculture Fund – especially with its ‘BlueInvest’ platform and the new BlueInvest Fund – will support the transition towards more sustainable value chains based on the oceans, seas and coastal activities. To further finance the transformation, the Commission has urged Member States to include investments for a sustainable blue economy in their national resilience and recovery plans as well as their national operational programmes for various EU-funds from now to 2027.  Other EU programmes such as the research programme Horizon Europe will also contribute and a dedicated Mission on Oceans and Waters will be set up.
As regards private investments, agreed ocean-specific sustainability principles and standards such as the EU-sponsored Sustainable Blue Economy Finance Initiative should be used in relevant investment decisions. 
Background
The European Union’s blue economy encompasses all industries and sectors related to oceans, seas and coasts, whether they are based directly in the marine environment (e.g. shipping, seafood, energy generation) or on land (e.g. ports, shipyards, coastal infrastructures). According to the most recent Blue economy report, the traditional sectors of blue economy provide 4.5 million direct jobs and generate over 650 billion euro in turnover.
Today’s Communicaton replaces the Blue Growth communication of 2012. The Maritime Spatial Planning Directive calls on all Member States to formally plan their maritime space by 2021.
Compliments of the European Commission.
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Inheritance taxation can be an important instrument to address inequality, particularly in the current context of persistently high wealth inequality and new pressures on public finances linked to the COVID-19 pandemic, according to a new OECD report.
Inheritance Taxation in OECD Countries provides a comparative assessment of inheritance, estate and gift taxes across the 37-member OECD, and explores the potential role these taxes could play in raising revenues, addressing inequalities and improving the efficiency of tax systems in the future.
The report highlights the high degree of wealth concentration in OECD countries as well as the unequal distribution of wealth transfers, which further reinforces inequality. On average, the inheritances and gifts reported by the wealthiest households (top 20%) are close to 50 times higher than those reported by the poorest households (bottom 20%).
The report points out that inheritance taxes – particularly those that target relatively high levels of wealth transfers – can reduce wealth concentration and enhance equality of opportunity. It also notes that inheritance taxes have generally been found to generate lower efficiency costs than other taxes on the wealthy, and to be easier to assess and collect than other forms of wealth taxation.
A majority of OECD countries currently levy inheritance or estate taxes – 24 in total. However, these taxes typically raise very little revenue. Today, only 0.5% of total tax revenues are sourced from inheritance, estate and gift taxes on average across the countries that levy them.

Courtesy of the OECD.
Generous tax exemptions and other forms of relief are a key factor limiting revenue from these taxes, according to the report. In addition to limiting revenue, relief provisions primarily benefit the wealthiest households, reducing the effective progressivity of inheritance and estate taxes.
Individuals are often able to pass on significant amounts of wealth tax-free to their close relatives thanks to high tax exemption thresholds. Tax relief is also common for transfers of specific assets (e.g. main residence, business and farm assets, pension assets, and life insurance policies). In a number of countries, inheritance and estate taxes can also largely be avoided through in-life gifts, due to their more favourable tax treatment.
These provisions reduce the number of wealth transfers that are subject to taxation, sometimes significantly so. For instance, across eight countries with available data, the share of estates subject to inheritance taxes was lowest in the United States (0.2%) and the United Kingdom (3.9%) and was highest in Switzerland (12.7%) (Canton of Zurich) and Belgium (48%) (Brussels-Capital region).
“While a majority of OECD countries levy inheritance and estate taxes, they play a more limited role than they could in raising revenue and addressing inequalities, because of the way they have been designed,” said Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration. “There are strong arguments for making greater use of inheritance taxes, but better design will be needed if these taxes are to achieve their objectives.”
The report underlines the wide variation in inheritance tax design across countries. The level of wealth that parents can transfer to their children tax-free ranges from close to USD 17 000 in Belgium (Brussels-Capital region) to more than USD 11 million in the United States. Tax rates also differ. While a majority of countries apply progressive tax rates, one-third apply flat rates, and tax rate levels vary widely.
The report proposes a range of reform options to enhance the revenue potential, efficiency and fairness of inheritance, estate and gift taxes, while noting that reforms will depend on country-specific circumstances.
It finds strong fairness arguments in favour of an inheritance tax levied on the value of the assets that beneficiaries receive, with an exemption for low-value inheritances. Levying an inheritance tax on a lifetime basis – on the overall amount of wealth received by beneficiaries over their lifetime through both gifts and inheritances – would be particularly equitable and reduce avoidance opportunities, but could increase administrative and compliance costs. Scaling back regressive tax reliefs, better aligning the tax treatment of gifts and inheritances and preventing avoidance and evasion are also identified as policy priorities.
To make these taxes more acceptable by the public at large, the report underlines the need to provide citizens with information on inequality and the way inheritance and estate taxes work, as these tend to be misunderstood.
“Inheritance taxation is not a silver bullet, however,” said Mr Saint-Amans. “Other reforms, particularly in relation to the taxation of personal capital income and capital gains, are key to ensuring that tax systems help reduce inequality. The OECD will be undertaking new work in that area, in particular as the progress made on international tax transparency and the exchange of information is giving countries a unique opportunity to revisit personal capital taxation.”
Experts from the OECD Centre for Tax Policy and Administration will lead a webinar discussion of the report on Wednesday 12 May 2021 at 11:00 CEST. Register.
Further information on Inheritance Taxation in OECD Countries is also available at: http://oe.cd/inheritancetax.
Contacts:

Media enquiries should be directed to Pascal Saint-Amans, Director, OECD Centre for Tax Policy and Administration (+33 1 4524 9108), David Bradbury, Head of the OECD’s Tax Policy and Statistics division (+33 1 4524 1597), or to Lawrence Speer (+33 1 4524 7970) in the OECD Media Office (+33 1 4524 9700).

Compliments of the OECD.
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Round XI Will Award More Than $750 Million Across All 10 REDC Regions to Build Back Better in a Post-COVID Economic Recovery
Governor Andrew M. Cuomo today launched Round XI of the Regional Economic Development Council initiative, officially kicking off a new decade of economic development in a post-pandemic recovery. The 2021 funding round includes more than $750 million in state economic development resources. The Consolidated Funding Application will open on May 10, enabling businesses, municipalities, not-for-profits and the public to begin applying for assistance from dozens of state programs for job-creation and community development projects.
“The COVID pandemic has taken a tremendous toll on our State, but now is our time to build back better and stronger than before and create a New York that serves our children and their children and their children,” Governor Cuomo said. “It’s going to be hard – it’s always hard to do what has never been done before – but after what New Yorkers have been through this part year, there is no challenge they can’t meet today. We’re announcing a new decade of the Regional Economic Development Councils so that regionals all across the state can plan their own economic rebirth and come up with their own smart and daring plans to rebuild, and New York State will fund it. We’ve done this before and it’s worked tremendously well, but it’s more important this year than ever before because the stakes are higher this year than ever before.”
Over the past 10 years, the Regional Economic Development Councils have revitalized the state’s economy from the ground up through a community-based and performance-driven approach to economic development. This year, New York State will again leverage the expertise of the REDCs to invest $750 million in strategic, regional efforts to drive the recovery in every corner of the state.
“As we enter the eleventh round of this initiative and as the State continues to move forward following the devastating effects of the pandemic, we are committed to this bottom-up approach to foster regional partnerships and make strategic investments,” said Lieutenant Governor Kathy Hochul, Chair of the statewide Regional Economic Development Councils. “New York has seen tremendous growth in all 10 regions through the REDCs.”
Round XI includes core capital and tax-credit funding that will be combined with a wide range of existing agency programs totaling approximately $750 million. The core funding includes $225 million in grants and tax credits to fund high value regional priority projects. The Budget also makes over $525 million in resources from state agencies available to support community revitalization and business growth consistent with the existing REDC plans through the CFA process.
In order to be responsive to the immediate needs of the development community and as the state is making crucial investments to generate economic activity, the $150 million in grant funds from Empire State Development will be made available to projects on a continuous and competitive basis this round.
Round XI Awards
The Regional Councils will identify and recommend priority projects that will be eligible for up to $150 million in capital funds on a rolling basis, meaning projects will be reviewed throughout the round. An emphasis will be placed on project readiness and alignment with each region’s strategic plan. Additionally, projects within each region will also be eligible for a share of $75 million in Excelsior Tax Credits to help attract and grow business in the region. Projects from all 10 regions submitted through the CFA will be eligible for over $525 million in other state agency funds, which are available on a set timeline. Regional Economic Development Councils will review these projects and provide scores that reflect how well a project aligns with a region’s goals and strategies.
The 2021 REDC Guidebook and list of available resources is accessible here. The CFA – available here – will open on Monday, May 10, and the deadline for applications is Friday, July 30 at 4 p.m.
The REDC process continues to improve the State’s approach to economic development, creating regional strategies for bottom-up, economic growth and streamlining the State funding application process. To date, through the REDC competition, more than $6.9 billion has been awarded to more than 8,300 job creation and community development projects consistent with each region’s strategic plans, which project to create and retain more than 240,000 jobs statewide.
To date, through the REDC competition:

Western New York REDC has been awarded $620.4 million for 890 projects;
Finger Lakes REDC has been awarded $721 million for 950 projects;
Southern Tier REDC has been awarded $702.3 million for 764 projects;
Central New York REDC has been awarded $789.8 million for 801 projects;
Mohawk Valley REDC has been awarded $697.7 million for 721 projects;
North Country REDC has been awarded $682.2 million for 690 projects;
Capital Region REDC has been awarded $673 million for 933 projects;
Mid-Hudson REDC has been awarded $713.6 million for 914 projects;
New York City REDC has been awarded $615.9 million for 819 projects; and
Long Island REDC has been awarded $727 million for 885 projects.

About the Consolidated Funding Application
As part of Governor Cuomo’s efforts to improve the State’s economic development model, the Consolidated Funding Application was created to streamline and expedite the grant application process. The CFA process marks a fundamental shift in the way state resources are allocated, ensuring less bureaucracy and greater efficiency to fulfill local economic development needs. The CFA serves as the single-entry point for access to economic development funding, ensuring applicants no longer have to slowly navigate multiple agencies and sources without any mechanism for coordination. Now, economic development projects use the CFA as a support mechanism to access multiple state funding sources through one application, making the process quicker, easier, and more productive. Learn more about the CFAhere.
About the Regional Economic Development Councils
The Regional Economic Development Council initiative is a key component of Governor Cuomo’s approach to State investment and economic development. In 2011, Governor Cuomo established 10 Regional Councils to develop long-term strategic plans for economic growth for their regions. The Councils are public-private partnerships made up of local experts and stakeholders from business, academia, local government, and non-governmental organizations. The Regional Councils have redefined the way New York invests in jobs and economic growth by putting in place a community-based, bottom up approach and establishing a competitive process for State resources. Learn more about the Regional Councils here.
Contact:

Albany: (518) 474 – 8418
New York City: (212) 681 – 4640
Press.Office@exec.ny.gov

Compliments of the Governor’s Office of New York.
The post Governor Cuomo Launches a New Decade of the Regional Economic Development Council Initiative first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The 2020 ECB Forum on Central Banking addressed some key issues from the ongoing monetary policy strategy review and embedded them in discussions of major structural changes in advanced economies and the post-COVID recovery. In this column, two of the organisers highlight some of the main points from the papers and debates, including whether globalisation is reversing, implications of climate change, options for formulating the ECB’s inflation aim, challenges with informal monetary policy communication, relationships between financial stability and monetary policy, how to make a monetary policy framework robust to deflation or inflation traps and the role of fiscal policy for the recovery from the pandemic.
1 Introduction
The 2020 ECB Forum was one of the “ECB listens” events through which the ECB collects the views of relevant outside parties on its monetary policy framework. Policymakers, academics and market economists debated the implications of selected key structural changes that have a bearing for how monetary policy works in the euro area, combined with discussions on core topics featuring in the strategy review. We group some of the main issues debated in five sections below. All papers, discussions and speeches can be found in the conference e-book (ECB 2021). Video recordings of all sessions are available on the ECB website.
2 Fundamental structural changes in the world economy: “Slowbalisation” and climate change
One of the key structural changes in the world economy over the last decades was globalisation. But since the Great Financial Crisis and with the rise of populism the issue has emerged as to whether this process is reversing to de-globalisation. Pol Antras (in Antras 2021) argues that international trade and supply chains have slowed but not reversed (“slowbalisation”) and may be regarded as not likely to turn to de-globalisation. The backward-looking part is illustrated in Chart 1, which shows that after a period of very fast “hyperglobalisation” between the mid-eighties and 2008, the share of world trade in world GDP has stayed roughly constant.

Chart 1
World trade relative to world GDP (1970-2018)
Source: Antras (2021), based on World Bank’s World Development Indicators (link).
Note: Trade is defined as the sum of exports and imports of goods and services.

Looking forward, Antras argues that two out of three main factors that explained “hyperglobalisation” are unlikely to reverse. First, new technologies will continue to foster trade, because those substituting (foreign) labour (such as robotisation or 3D printing) still generate increased demand for traded goods (such as machines or IT parts). Second, the high sunk costs of establishing global supply chains make them resilient to temporary shocks and re-shoring only attractive for very persistent shocks. The only hyperglobalisation factor risking to reverse is multilateral trade liberalisation. To the extent that agents perceive the COVID-19 pandemic as temporary, it is unlikely to become a persistent de-globalisation force.
Susan Lund (in Lund 2021) added that China rotating from exports to domestic consumption and building domestic supply chains can account for most of the global trade slowdown over the last decade. As both reflect economic development, it may be regarded as a positive story, one also other emerging economies may go through in the future.
Climate change is likely to set in motion another set of major structural changes in the world economy. But Frederick van der Ploeg (in van der Ploeg 2021) strongly warns of the great risk that policy responses will be too timid and too late, implying an unsmooth carbon transition with stranded assets and financial instability. A sudden shift in climate policy or a technological breakthrough can lead to sudden changes in the market valuation of firms (so-called tipping events). Chart 2 (taken from van der Ploeg 2018) illustrates that the route of a cap to global warming taken by the Intergovernmental Panel on Climate Change (dotted line) would increase the carbon price (and therefore reduce carbon emissions and increase renewables) much faster than economists’ preferred approach of pricing carbon at its estimated social costs (solid line). The reason is that economists’ “Pigouvian” approach does not take peak temperature constraints into account, and thus prices do not have to rise so fiercely under it.

Chart 2
Evolution of the carbon price implied by the Pigouvian versus the carbon budget approach to climate policy
Source: van der Ploeg (2018) and van der Ploeg (2021)
Note: The solid line represents the necessary evolution of the calibrated optimal carbon price, as derived from a simplified Dynamic Integrated Climate-Economy (DICE, see e.g. Nordhaus 1993) model that sets the optimal price equal to the social cost of carbon (“Pigouvian approach”). The social cost is defined as the present discounted value of all future production losses stemming from emitting one ton of carbon today. The dotted line not only takes into account the social cost of carbon but also the need to keep peak global warming below 2 ℃ (relative to global temperature in the pre-industrial era; “carbon budget approach”). This is in line with the route taken by the IPCC.

Van der Ploeg (2021) calls for climate policies being delegated to a politically independent emissions authority (“carbon central bank”), the carbon price starting relatively high and then growing moderately but steadily (avoiding paradoxical emission increases due to the anticipation of future policy tightening), using revenues to compensate low-income households and to support firms at risk from carbon-intensive imports as well as keeping financial stability risks under control with climate stress tests. Francois Villeroy de Galhau suggested that central banks look at whether climate risks are adequately reflected in their collateral frameworks. Krogstrup (2021) concluded that fiscal policy should be first in line for a cost-efficient carbon transition, but central banks will address their stake in it.
3 Formulations of central banks’ inflation aim close to the effective lower bound of nominal interest rates
One of the key challenges for monetary policy in our times is the sustained downward trend in natural interest rates that can be estimated for the past decades (Laubach and Williams 2003, Brand et al. 2018). The low estimates of natural rates imply that central banks’ conventional interest rate policy may not be able to provide sufficient stimulus in the presence of negative shocks, as policy rates cannot be reduced low enough below the natural rate.
Klaus Adam (in Adam 2021) argued that an increase in the inflation target could be a solution, because – if the increase is credible – the inflation expectations that it would induce would stimulate the economy through lower real interest rates. His research suggests that the declining natural rate also influences asset price volatility and that therefore the efficiency of financial markets has a bearing on the extent to which the target should be increased and whether monetary policy should react to longer run asset price fluctuations. More precisely, the New-Keynesian model developed in Adam et al. (2020) suggests that, with rational expectations in financial markets, the optimal increase in the target to compensate for the constrained policy rate is relatively small (red line in Chart 2). The inflation target needs to be increased by much more when subjective price expectations create procyclical asset price fluctuations (blue line in Chart 2), as the effective lower bound (ELB) of monetary policy rates is hit more often.

Chart 3
Relationships between the optimal inflation target, the natural rate of interest and expectation formation in housing markets due to the effective lower bound on nominal rates
Source: Adam (2021)
Note: This chart illustrates the optimal inflation target, i.e., the average inflation outcome under optimal conduct of monetary policy. For each considered level of the average natural rate (on the x-axis), the chart reports the optimal inflation target (on the y-axis) in an economy with an effective lower bound constraint, relative to the target that would be optimal in the absence of a lower-bound constraint. The blue line shows the optimal inflation target in an economy where house prices are efficient (i.e. driven by fundamentals only). The red line reports the optimal inflation target for the case where housing prices are driven – at least partly – by fluctuations in subjective housing price expectations. Numbers are based on a New Keynesian sticky price model from Adam, Pfaeuti and Reinelt (2020), calibrated to US data. In the absence of a lower bound constraint, the optimal inflation target is zero, because the model abstracts from other forces that make targeting positive average rates of inflation optimal.

Interestingly, in this model the central bank finds “leaning” against inefficient asset price fluctuations optimal, undershooting the inflation target in upturns and overshooting it in downturns. The reason is that inefficiently high asset price volatility has too high a welfare cost in terms of capital misallocation towards appreciating assets.
Argia Sbordone (in Sbordone 2021) argued that, in Adam’s model, the increased incidence of the lower bound constraint does not imply that optimal policy raises the long-term inflation target. Instead, it increases the time for which the central bank should temporarily target higher future inflation than its stated long-term inflation target. This de facto would be similar to average inflation targeting (AIT), the policy announced by the US Federal Reserve in 2020. In Sbordone’s view such a policy is preferable, because it faces a lower risk of permanently higher inflation when ELB incidences turn out to be infrequent. Alan Blinder made the point, however, that the vague formulation by the Fed risked undermining the basic idea of AIT.
Jordi Galí (in Galí 2021, Chart 1) showed a similar negative relationship as Adam between the natural rate and the central bank’s optimal inflation target, based on a New-Keynesian model calibrated to euro area data (Andrade et al. 2021). It suggests that while a target between 1.5 and 2 per cent would be optimal for a higher real interest rate, for the lower levels estimated nowadays the target could easily increase to around 3 per cent. However, for increasingly aggressive monetary policy rules embodying an AIT with long enough averaging window, the optimal target could be reduced to close to 2 per cent. Aggressive countercyclical fiscal policy rules would have a similar effect in the model. Galí concluded that rather than deciding in favour of one of the three options, policy makers may want to pursue all the three at the same time.
Volker Wieland (in Wieland 2021) regarded it as problematic to raise the ECB’s inflation aim at a time when inflation is very low, as the distance between the two is very large in such a situation and further policy easing may be difficult to achieve. Hence, the desired inflation expectations effect may not materialise and the central bank’s credibility be eroded. Vítor Constâncio and Ignazio Visco argued the other way around, worrying that too little ambition could contribute to de-anchoring inflation expectations making convergence to the desirable levels of inflation more difficult.
Moreover, as Wieland saw a significant part of low inflation in the euro area being caused by import prices and the headline HICP inflation index does not cover faster rising owner-occupied housing prices, he recommended that the ECB uses a wider range of inflation measures. Based on a model in Wieland (2020), he also wondered whether uncertainty about the effectiveness of quantitative easing and some unintended side effects would not justify a slower rather than faster convergence towards the inflation aim.
4 Undesirable informal monetary policy communication
Annette Vissing-Jorgensen opened the topic of monetary policy communication (Vissing-Jorgensen 2021). One of her main points was that unattributed individual communication, such as “sources stories” in the media driven by disagreements among policy makers, are subject to a prisoner’s dilemma-type problem and unambiguously detrimental. She illustrated this point with a game-theoretic model of individual policy makers trying to “spin” market expectations towards their preferred choices (Vissing-Jorgensen 2020). While asset prices may not be distorted on average, as victories and defeats cancel out over time, the policy space of the decision-making body will still be constrained, as central banks have to mind about too material deviations between market expectations and ultimate decisions. Vissing-Jorgensen recommended consensus-building in monetary policy committees, as it would naturally reduce incentives for engaging in such individual informal communications.
5 Monetary policy, the allocation of risk and central bank independence
Lucrezia Reichlin (in Reichlin 2021) spelled out a conceptual framework for the relationships between monetary policy, risk and financial stability in the new world of unconventional instruments. She stressed the multi-dimensional nature of unconventional monetary policy “packages”, which control the entire yield curve and create complex interactions between macroeconomic and financial risks.
These policies can only be effective in supporting the macroeconomy, if they induce the creation of new assets climbing up the risk spectrum. If the new assets finance productive activities, then the additional risks are “good”. But prudential policy would need to prevent the creation of “bad” risks. Delayed, partial or incoherent use of the range of instruments would undermine effectiveness; and so would be neglecting interactions and coordination with fiscal policy.
Hyun Shin (in Shin 2021) complemented this with emphasising the importance of “elastic nodes” in the financial system, which need to help accommodate the much-increased demand for money in situations of stress. The first line of defence should be well-capitalised and resilient commercial banks; an example being how US banks allowed companies to draw on their credit lines during the “dash for cash” in March 2020 (at the start of the COVID crisis). In fact, several Forum speakers – such as Jerome Powell and Bank of England Governor Andrew Bailey – confirmed that banks generally stood up to this first major test of the reforms introduced after the Great Financial Crisis.
Markus Brunnermeier (in Brunnermeier 2021) broadened the discussion with a proposal about how a monetary policy strategy can be robustified against the risk of a central bank getting trapped in high inflation or deflation. In the post-COVID recovery an “inflation whipsaw” could emerge, in that pent-up demand, government commitments or capital re-allocation could create a reversal from low to high inflation (Brunnermeier et al. 2020). In other words, it is necessary that the central bank can “put on the breaks” later, in order to be able to confidently stimulate the economy with force in the low inflation context.
But if during the downturn government debt becomes too high, a situation of fiscal dominance could occur, as the central bank could not raise interest rates in the upturn without destabilising the budgets. Similarly, if the banking sector was not to maintain its resilience and if the government was unwilling or unable to recapitalise the banks, the central bank may be forced to stabilise them with monetary policy redistributing risk – a situation of financial dominance. Brunnermeier suggested that the relevant tail risks would be considered in a re-oriented second pillar in the ECB’s monetary policy strategy. This would institutionalise heterogeneous thinking and go against relying on a uniform class of economic models.
6 The role of fiscal policy in the post-COVID recovery
Evi Pappa (in Pappa 2021) made a strong plea for discretionary fiscal policy taking a prominent role in the recovery from the COVID pandemic. The theoretical case relies on higher fiscal multipliers in a situation in which conventional monetary policy is close to the ELB, as the central bank would not tighten in response to inflation expectations ensuing from the fiscal stimulus. In line with this, Christine Lagarde argued in her introductory speech to the Forum (Lagarde 2021) that monetary policy should minimise any crowding out effects on private investment that may emerge from rising market interest rates that the fiscal expansion could induce.
Based on the experiences with European Union structural funds for member states and regions over the last 30 years, Pappa particularly supported public investment spending funded by the Next Generation EU recovery programme. Her estimations in Table 1 (Canova and Pappa 2020) suggest that grants provided by the European Regional Development Fund have sizeable short-term effects. Measurable effects of grants by the European Social Fund take more time to materialise. At the same time, Pappa cautioned that the literature suggests that the size of fiscal multipliers can depend on many factors.

Table 1
Average cumulative multipliers from grants under the European Regional Development Fund (ERDF) and the European Social Fund (ESF)
Source: Canova and Pappa (2020)
Notes: This table examines the dynamic effects of ERDF and ESF grants on regional (NUTS3-level) macroeconomic variables in European Union countries, using local projections. The main regression specification is as follows: yi,t,h=ai,h+bi,hyi,t−1,h+ci,hxi,t,h+ei,t,hyi,t,h=ai,h+bi,hyi,t-1,h+ci,hxi,t,h+ei,t,h ,where yi,t,hyi,t,h is the cumulative growth of the macroeconomic variable of interest in region i and year t over the time-horizon h (either 1,2 or 3 years, see columns) and xi,t,h xi,t,h is the cumulative change in the relevant grant (scaled by regional gross-value added). The estimated coefficients displayed in the table correspond to ci,hci,h and standard errors are in parentheses. The coefficients can therefore be interpreted as the cumulative fiscal multipliers of the fund grants (euro change per euro of grants), or put differently as elasticities measured in per cent, at each horizon h. Given the potential endogeneity of structural funds to EU economic conditions, the authors instrument actual grants with their “innovations”. To this effect they run the following auxiliary regression: xi,t,h=αi,h+βi,hwt,h+ui,t,hxi,t,h=αi,h+βi,hwt,h+ui,t,h, where wt,hwt,h represents a set of four aggregate euro area variables: GDP, employment, the GDP deflator, the nominal interest rate, and the nominal effective exchange rate. They then use the “innovation” ui,t,hui,t,h as an instrument for xi,t,hxi,t,h in the main equation.

Vítor Gaspar (in Gaspar 2021) added that while national fiscal support packages increased euro area public debt by about 17 percentage points during 2020 to above 100 per cent of GDP, the primary risk at the time of the Forum was the premature withdrawal of fiscal support. Moreover, he joined Evi Pappa in supporting public investment, emphasising the International Monetary Fund’s assessment that fiscal multipliers are particularly elevated in periods of high uncertainty (see Chart 4, based on IMF 2020), such as the case during the COVID pandemic (e.g. Barrero and Bloom 2020). According to Gaspar, this happens because public support to investment in green and digital technologies would facilitate and give confidence to private firms to invest, in part because public investments signal governments’ commitment to sustainable growth.

Chart 4
Public investment multipliers and private investment “crowd-in” for different levels of economic uncertainty

Cumulative two-year-ahead macroeconomic effects of a one-percent-of-GDP unexpected increase of public investment

Source: Gaspar (2021) and IMF Fiscal Monitor (October 2020)
Note: Effects on the vertical axes are measured in percentage changes over two years. Results are based on local projection estimations using the model yi,t+k−yi,t=αi+γt+β1G(zi,t)FE+i,t+β2(1−G(zi,t))FE+i,t+θMi,t+εi,tyi,t+k-yi,t=αi+γt+β1Gzi,tFEi,t++β21-Gzi,tFEi,t++θMi,t+εi,t, where yi,tyi,t is the log of the macroeconomic variable of interest (real GDP for panel a) and private investment for panel b) for country i in year t, FE+i,tFEi,t+ is a positive unexpected shock to public investment spending (as share of GDP), in deviation from IMF forecasts, z is an indicator of the degree of uncertainty, and G(zi,t)Gzi,t is the corresponding smooth transition function between different levels of uncertainty. Mi,tMi,t includes lagged GDP growth and lagged shocks. Uncertainty is measured by the standard deviation of GDP growth rate forecasts across professional forecasters as published by Consensus Economics, using for each year the spring vintage of the forecasts. Data covers 72 advanced and emerging markets; the sample period is 1994-2019.

Lagarde (2021) contributed that in a pandemic emergency, when interest rates are already very low, private demand is constrained by health containment measures and levels of economic uncertainty are very high, fiscal policy can be particularly effective for at least two more reasons. First, it can support the sectors most affected in a more targeted way than monetary policy (Woodford 2020). Second, as fiscal policy determines about half of total spending in the euro area, it can help coordinate the other half, breaking “paradox of thrift” dynamics in the private sector and thereby also reinvigorating the transmission of monetary policy. All in all, the right policy mix requires that fiscal policy remains at the centre of the stabilisation effort.
Authors:

Philipp Hartmann
Glenn Schepens

Authors’ note: All views expressed are summarised to the best of our understanding from the various participants’ Forum contributions and should not be interpreted as the views of the ECB or the Eurosystem
Compliments of the European Central Bank.
The post ECB | Central banks in a shifting world: selected takeaways from the ECB’s online Sintra Forum first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.