Supplementing the discussion in ifo Schnelldienst 11/2004, Prof. Christoph Spengel, University of Gießen, argues for a harmonisation of the effective enterprise tax burden in the EU. What is needed “in addition to an convergence of corporation tax rates, at least in terms of setting lower limits, is a harmonisation of the national rules for computing profits. Dr. Wolfgang Eggert, Ifo Institute, regards as reasonable the harmonisation of enterprise taxation from an EU perspective “if, by means of harmonisation, existing distortions in capital allocation can be reduced, if the possibilities of multinational enterprises to shift international profits can be lowered, and if the administrative costs of enterprises and governments can be reduced.
Václav Klaus
As visiting speaker at this year’s Annual Meeting, Ifo was honoured by the President of the Czech Republic, Prof. Václav Klaus, who spoke on the effects of EU enlargement on both the new and old member states and on the EU as an institution. President Klaus emphasised that the new members have gained secure political recognition, which is especially important for them. “Through EU membership they will again be counted as normal European countries, after half a century of abnormality, after half a century of life under the communism.” For the previous member states Klaus sees few advantages. For the EU as an institution, transaction costs will increase with a great impact on decision making.
Hans-Werner Sinn
In his speech at the 3rd Munich Economic Summit on 18 June 2004 Prof. Hans-Werner Sinn presented his position on the new EU freedom of movement directive. He warned of a danger of an erosion of the welfare state that will arise from freedom of movement and full social inclusion. Freedom of movement, full social inclusion rights and the social welfare state are three goals that cannot coexist; one must be abandoned. He recommended the application of the principle of the selectively delayed integration into the welfare state for employed persons and the home-country principle for those who are not employed. In this way Europe can remain liberal and retain its social welfare system at the same time.
Peter Jäckel
According to the results of the Ifo Investment Survey in eastern Germany, carried out between the end of 2003 and July 2004, the investments of eastern German manufacturing, after a perceptible decline in 2002 (-6%), will increase again in 2004, approximating the level of the years 1998/99. On the basis of still not final enterprise data, an investment increase of a nominal 1% or €6.7 billion was estimated for 2003; for 2004 an increase of 9% or €7.3 billion is expected. Almost 40% of the investments planned for the current year originate from the budgets of only two industries: electrical engineering and automobile construction. Compared with the development of investments in manufacturing in western Germany (2002: a somewhat stronger drop of 7%; 2003: a repeated drop of 2%; 2004: at 4% a not so clearly planned increase), this is a quite positive result. It shows again that the total volume of investments in manufacturing in eastern Germany is strongly determined by strategic influences and not solely by business-cycle aspects.
Volker Russig
Housing construction in Europe is experiencing a particularly stubborn phase of weak activity. True, a slight recovery was recorded in 2003 and 2004; the number of completed units in new residential buildings is likely to increase by more than 2.2 million units in 2004 (nearly an 8% increase over 2001) in the 15 western European and 4 eastern European countries of the Euroconstruct group. However, already for 2005 a strong drop of the completions of single homes is predicted that will not be offset by the renewed slight rise in units in new residential buildings. The outlook for 2006 calls for stagnation for both building categories at low levels.
Oscar-Erich Kuntze
In Finland the real gross domestic product expanded in 2003 by 1.9%, with considerable support from private consumption. On the labour market the situation remained largely unchanged, with employment falling by 0.3 % over 2002 and an unemployment rate of 9.0%. Inflation was 1.3% for the year. In 2004 real GDP will increase by approximately 3%. The unemployment rate will decrease to just below 9%. Consumer prices will be about ½% above the previous-year level. In 2005 real GDP will increase by 3¼%. The unemployment rate will decrease to 8½% and inflation will stand at 1¾%.
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