Do fiscal rules constrain political budget cycles?

Gootjes, Bram; Haan, Jakob de; Jong‐A‐Pin, Richard

doi:10.1007/s11127-020-00797-3

Cited by 67 publications

(52 citation statements)

References 66 publications

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“…Another issue that should be stressed and may interpret our findings is related to the fact that, the economic crisis within the European Union has led the governments in the name of the Stability and Growth Pact to implement strict fiscal rules, limiting in sequence the government's ability to exercise public management [54][55][56][57][58][59][60][61]. Furthermore, in our study concerning Greece an economy with a number of particularities such as bureaucracy, huge public debt, and the Memorandum in valid formulate an economic environment vulnerable to economic shocks either related to the pandemic or to other sources [1].…”

Section: Discussionmentioning

confidence: 99%

GDP and Public Expenditure in Education, Health, and Defense. Empirical Research for Greece

et al. 2021

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Wagner Law and Keynesian approaches are the two fundamental theories of public finance. The aim of this study is to assess empirical evidence for the public spending–national income relationship at a disaggregated level for the time period 1995–2019. The sectoral public expenditures include education, health, and defense. The data employed were derived by EUROSTAT and OECD. Based on our findings, a sole relationship of the variables was validated, while the causality of the relationship provides conflict results depending on whether two-variate or multivariate methodology is employed. In the case of the multivariate framework that outperforms the two-variate approach in terms of information, the causality is directed from government expenses to the GDP level, validating the Keynesian approach in the long run as well as in the short run. On the other hand, the results validate Wagner Law based on the results of Granger causality pairwise test. A potential interpreatation for the results found is related to the measures imposed by the Memorandum, since the disproportionate cuts of the public expenses in the period of crisis have determined the evolution of national income. The scientific value of the presents study stands on the suggestion of potential effective measures aiming at the limitation of national income shrinkage in periods of severe economic crises worldwide.

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Section: Discussionmentioning

confidence: 99%

GDP and Public Expenditure in Education, Health, and Defense. Empirical Research for Greece

et al. 2021

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“…First of all, it should be noted that, as part of a scientific study, one of the important tasks is to understand the theoretical aspects and practice in the specifics of supranational legal regulation of CFCs' income taxation in the countries of the European Union (Gootjes, 2020). At the same time, for quite a long time, there has been a clear tendency in the legal regulation in the field of taxation in the EU member states aimed at phasing out tax sovereignty within the framework of the united pan-European doctrine and economic community, represented primarily by transnational corporations (Baudot, 2020).…”

Section: Discussionmentioning

confidence: 99%

Controlled foreign companies: influence on the sovereignty of the national tax base

Khoruzhy¹,

Karabasheva²,

Hajiyev³

et al. 2020

JESI

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World experience in economic development over recent periods indicates that, despite periodically occurring crisis situations, including globalization processes appearing all over specific countries, Such situations consistently develop on a more accelerated scale. Undoubtedly, the crisis situation that developed in the world market in the first half of 2020 under the influence of COVID-19 on all economies of countries without exception has had a great influence, and the nature of such an influence will certainly be felt over the next several years. In this vein, the establishment of the rules applicable in a particular jurisdiction regarding the activities of controlled foreign companies is one of the mechanisms for any state to protect its own national tax base. Using this approach, the modern rules of tax regulation of controlled foreign companies provide for the establishment of special rules for the shareholders, acting as controlling persons in terms of profits obtained from their foreign companies. At the same time, the application of tax exemptions to the profits of controlled foreign companies is undoubtedly one of the riskiest operations, despite the fact that a wide list of grounds for their application may be provided for within the specific state. As a result of a study of the activities of controlled foreign companies operating within the framework of national jurisdiction, when analyzing the degree of influence of tax bases, a strongly pronounced linear relationship with a correlation coefficient of -0.93 was revealed. This circumstance made it possible to identify the following important feature for controlled foreign companies: financial corporations are no longer attracted by the option of being in a specific national jurisdiction; moreover, they are more focused on other jurisdictions, including low-tax or offshore ones. The correlation analysis revealed a strongly pronounced linear relationship between the tax base and the tax rates; however, in terms of controlled foreign companies, which are primarily subject to national legislation, the correlation coefficient amounted to +0.89, which characterizes the economic tendency to reduce their financial investments, despite the reduction of the actual tax rate. In turn, for controlled foreign companies, whose activities are regulated to a greater extent by foreign legislation, the correlation coefficient amounted to -0.93, which is characterized by a reflection of the greater economic effect of actual tax rate reduction according to the following scenario: the tax rate reduction represents more financial injections for a particular national jurisdiction. At the same time, against the background of the quite consistent and successful in specific areas unification of EU tax rules, the problem of the incoherence of the rules concerning controlled foreign companies versus national jurisdictions of both ENTREPRENEURSHIP AND SUSTAINABILITY ISSUES

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“…Fiscal rules contribute to disciplined fiscal policy after a change in government [66]. Moreover, countries with established democracies tend to have a strong effect of fiscal rules [67]. Transparency of the process is extremely important.…”

Section: Procedural Issuesmentioning

confidence: 99%

Fiscal Rules for Natural Disaster- and Climate Change-Prone Small States

Nakatani

2021

Sustainability

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How should small states formulate a countercyclical fiscal policy to achieve economic stability and fiscal sustainability when they are prone to natural disasters, climate change, commodity price changes, and uncertain donor grants? We study how natural disasters and climate change affect long-term debt dynamics, and we propose cutting-edge fiscal policy rules. We find the primacy of a recurrent expenditure rule based on non-resource and non-grant revenue, interdependently determined by government debt and budget balance targets with expected disaster shocks. This innovative fiscal rule is classified as a natural disaster-resilient fiscal rule, which comprises a plethora of new advantages compared to existing fiscal rules. This new type of fiscal rule can be called as the third-generation fiscal rule. It encompasses natural disasters and climate change, uses budget data only, avoids the need for escape clauses, and operates on a timely basis. Our rule-based fiscal policy framework is practically applicable for many developing countries facing an increasing frequency and impact of devastating natural hazards, and climatic change.

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Do fiscal rules constrain political budget cycles?

Cited by 67 publications

References 66 publications

GDP and Public Expenditure in Education, Health, and Defense. Empirical Research for Greece

GDP and Public Expenditure in Education, Health, and Defense. Empirical Research for Greece

Controlled foreign companies: influence on the sovereignty of the national tax base

Fiscal Rules for Natural Disaster- and Climate Change-Prone Small States

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