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The United States’ resistance to the multilateral effort to harmonize or internationalize antitrust laws is somewhat puzzling. It is presumably in the interests of U.S. companies and U.S. enforcement agencies to have a single international antitrust standard: for companies, a single standard would reduce the transaction costs of engaging in multinational business, and for enforcement agencies, a single standard would ensure uniform and effective enforcement of antitrust laws extraterritorially. Moreover, from the point of view of the government, required adherence to an international enforcement norm could serve as a “hands-tying” mechanism that would commit the government to a preferred long-term course of action and discourage defection caused by short-term, domestic political incentives.5

[FOOTNOTE] 5 For example, the WTO commits the United States to a particular level of tariffs and deters it from sacrificing the long-term benefits of open trade for a short-term response to domestic demands for protection. The deterrence is not perfect—as evidenced by the steel tariff kerfuffle during George W. Bush’s presidency and the Chinese tire dust-up more recently during the Obama presidency—but it substantially raises the political costs of such defections. See Dan Ackman, Bush Cuts Steel Tariffs, Declares Victory, FORBES (Dec. 5, 2003), http://www.forbes.com/2003/12/05/cx_da_1205topnews .html; Peter Whoriskey & Anne Komblut, U.S. to Impose Tariff on Tires from China, WASH. POST (Sept. 12, 2009), http://www.washingtonpost.com/wp -dyn /content/article/2009/09/11/AR2009091103957.html. [END FOOTNOTE]

Audience cost is based on the theory that the audience cares more about consistency between a government’s words and deeds than the substance or results of foreign policy. Thus, the argument works independently of interest group the preferences or those of the public. Of course, it is important for decision makers to determine the extent to which the interests of the political leadership and those of interest groups and the public coincide or disagree on policy issues, but it is not germane to the audience cost argument per se. Audience cost is an additional factor that affects decisions of the political leadership, independently of the policy preferences of social groups. The domestic audience punishes its government for backing down from a public threat even if this drawback would be in its interest if the threat had not taken place in the first instance (Clare, 2007; Snyder and Borghard, 2011). One reason for this reaction can be that the audience cares about a government’s competence or a nation’s reputation or honor (Clare, 2007; Smith, 1998; Tomz, 2007). When a government backs down from a public threat, the audience could see a government’s inconsistency between words and deeds as incompetence or damaging for the national honor. Because it stands to reason that voters tend to evaluate the national honor more than interest groups and an attentive public that already have well-defined and specific interests, audience cost tend to be higher when the audience comprises more voters of the general public. This argument is supplemented by Chaudoin (2014) who proves that if the audience has strong preferences over policy choices themselves, they care less about the consistency of the leadership’s words and deeds but more about the final policy. Thus, the less clear the audience’s policy preferences are, the higher the audience costs. Yet, Levy (2012: 286) criticizes that public concerns about national honor are more affected when the adversary has initiated a threat. In this case, a government would tie the hands of the adversary more than its own by threatening publicly. Furthermore, Baum (2004: 608) emphasizes that rational voters would recognize that backing down is a wise decision in some situations and therefore a loss of national reputation is acceptable. It could also be argued that the audience sees threats just as cheap talk. Snyder and Borghard (2011: 440) emphasize that there is evidence that domestic audiences care about national honor, but little evidence that they care independently about empty threats. In the US-South Korea beef dispute, for instance, concerns about national honor seemed to play a minor role compared to the substance of the policy issue, namely, the concerns about public health.

Alternative explanation

Political damage, while unquantifiable, must be added to the charge sheet: most centrally, tax havens provide hiding places for the illicit activities of elites who use them, at the expense of the less powerful majority. Tax havens defend themselves as “tax neutral” conduits helping international finance and investment flow smoothly. But while the benefits for the private players involved are evident, the same may not be true for the world as a whole; it is now widely accepted that in addition to tax losses, allowing capital to flow freely across borders carries risks, including the danger of financial instability in emerging market economies.

As a general rule, the wealthier the individual and the larger the multinational corporation—some have hundreds of subsidiaries offshore—the more deeply they are embedded in the offshore system and the more vigorously they defend it. Powerful governments also have a stake; most major havens are located in advanced economies or their territories. The Tax Justice Network’s Corporate Tax Haven Index ranks the top three as the British Virgin Islands, Bermuda, and the Cayman Islands—all British overseas territories. The organization’s Financial Secrecy Index ranks Switzerland, the United States, and the Cayman Islands as the top three jurisdictions for private wealth.

Until the 2008 financial crisis, tax havens were generally seen as exotic sideshows to the global economy, Caribbean islands or Alpine financial fortresses frequented by celebrities, gangsters, and wealthy aristocrats. Since then, the world has woken up to two sobering facts: first, the phenomenon is far bigger and more central to the global economy than nearly anyone had imagined; and second, the biggest havens aren’t where we thought they were.

Tax havens collectively cost governments between $500 billion and $600 billion a year in lost corporate tax revenue, depending on the estimate (Crivelli, de Mooij, and Keen 2015; Cobham and Janský 2018), through legal and not-so-legal means. Of that lost revenue, low-income economies account for some $200 billion—a larger hit as a percentage of GDP than advanced economies and more than the $150 billion or so they receive each year in foreign development assistance. American Fortune 500 companies alone held an estimated $2.6 trillion offshore in 2017, though a small portion of that has been repatriated following US tax reforms in 2018.

One problem with this strategy is that it might lead to a "race to the bottom." If one country seeks to attract foreign investment by offering preferential tax treatment (that is, by taxing foreign investors less heavily than it taxes resident investors), other countries might be more generous still. The ultimate consequence might be that countries go on cutting the taxes they impose on foreign investors until the benefit they derive is reduced to zero. Thus, tax competition, rather than facilitating growth in poor countries, might merely enable firms from rich countries to go on exploiting the resources of poor ones (land, labor, minerals, and so on). Indeed, perhaps the principal effect of such incentives is to make such exploitation more profitable than before. In other words, tax incentives targeted at foreign investors, far from alleviating poverty, might perpetuate and even exacerbate it.' If developing countries succeed in attracting foreign investment, this could entail negative consequences for the country of residence of the foreign investor. For example, a firm might close down a factory in a high-tax rich country and establish a new one in a low-tax poor country. From the rich country's point of view, the consequences might include both (a) a decrease in economic activity generally (manifesting itself in job losses, in particular) and (b) a fall in government revenue. It is not surprising, then, that the rich countries have watched with some discomfort the efforts of the developing countries to attract foreign investment by means of tax incentives.

13.Recommendation concerning co-ordinated enforcement regimes (joint audits; co-ordinated training programmes, etc.): that countries consider undertaking co-ordinated enforcement programs (such as simultaneous examinations, specific exchange of information projects or joint training activities) in relation to income or taxpayers benefiting from practices constituting harmful tax competition.

133.Since the late 1970s, a number of countries have developed simultaneous or joint audit programs under which the tax authorities of both countries audit the tax returns of affiliated corporations for the same taxation year. This form of co-operation should be intensified since such audit programmes can help achieve the objectives of this Report.

Taxes and social transfers can be important tools for redistribution. Yet, despite their potential, they have not been used to the extent needed to keep pace with increasing inequality. To the extent that policy makers consider rising income inequality problematic, several policy options can be considered. The purpose of these policy options is to address increasing income inequality without adversely affecting economic growth. First, there may be a case for increasing the progressivity of the tax system. To this end, governments could ensure that tax rates on high incomes are not further reduced – an international trend highlighted in this chapter – and limit regressive tax exceptions. In certain countries there may be a case for refraining from further increase in VAT and other indirect taxes (often regressive), introduced to compensate for reductions in government revenue arising from lowered income taxes and trade tariff reductions. Second, in order to avoid the risk of harmful international tax competition, multilateral action may be needed. Indeed there are many countries that cannot enhance the progressivity of their tax system, because doing so may encourage mobile, high-income groups to leave. Of course, any efforts to curb harmful tax competition must give consideration to cases where countries have legitimately reduced taxes to improve economic efficiency. Third, tax and social policy need to support employment –a key redistribution mechanism. This means removing tax distortions that affect labour market participation.

IV. Recommendations to intensify international co-operation in response to harmful tax competition

138.Although one country’s actions can be influential in curbing harmful tax practices, it is difficult for the actions of any single country to eliminate harmful tax practices. In fact, for many reasons, individual countries may not have a strong incentive to take action against harmful tax practices since, by so doing, they can worsen their position relative to where they would have been if they had not acted at all. For example, as a result of some of the defensive measures an individual country takes to counteract harmful tax practices, the targeted activity may simply move to another location that is not taking measures to combat such practices. Thus, individual actions do not completely solve the problem; they may merely displace it. For this reason, a multilateral approach is required and the OECD is the most appropriate forum to undertake this task.

In analogy to income tax competition, uncoordinated attempts to discourage greenhouse gas emissions face national hurdles. Higher carbon pricing in one country, for instance, increases the costs for its domestic producers, posing competitiveness concerns and potentially motivating production and emissions to move to other countries (that is, carbon leakage). Even if some countries begin implementing domestic mitigation policies, others may wait to benefit from avoiding the costs of reducing emissions. This “free-riding” issue, together with competitiveness concerns, hampers global progress on emission reduction.

In contrast with the vital role of small countries in hosting global income and wealth, a handful of large economic regions account for the majority of global emissions. International coordination could therefore generate significant progress—at least initially—in a setting with fewer participants. For example, China, the European Union, India, and the United States together are responsible for 64 percent of global emissions (Parry, Black, and Roaf 2021).

International coordination on tax matters is needed now more than ever. National governments share challenges in securing revenues, addressing inequalities, and curbing greenhouse gas emissions. Succeeding in these efforts increasingly requires dealing with pressures that cannot be stopped by national borders. These cross-border spillovers—the effects of one country’s actions on other countries—necessitate international coordination. The most pressing areas for coordination are the taxation of multinational enterprises (multinationals) and individuals, as well as carbon pricing.

Recent achievements toward international tax coordination include the agreement in October 2021 under the Organisation for Economic Co-operation and Development (OECD)/Group of Twenty (G20) Inclusive Framework to reform the taxation of multinationals (OECD 2021d), international agreements to exchange information led by the Global Forum, and countries’ pledges under the Paris Agreement and the UN Climate Change Conference at Glasgow (COP26) to reduce emissions.1 However, much more should be done.

Organization and Structure The IMF’s governing document, the Articles of Agreement, provides for a three-tiered governance structure with a board of governors, an executive board, and a managing director. The board of governors is the highest policymaking authority of the IMF. All member countries are represented on the board of governors, usually at the finance minister or central bank governor level. Day-to-day authority over operational policy, lending, and other matters is vested in the board of executive directors, a 24-member body that meets three or more times a week to oversee and supervise the activities of the IMF. As the largest shareholder, the United States has its own seat on the executive board. The executive board or board of governors of the IMF can approve loans, policy decisions, and many other matters by a simple majority vote; however, a supermajority vote is required to approve major IMF decisions. The supermajority may require a 70% or 85% vote, depending on the issue. At 17.43% of total voting power, the United States has veto over major policy decisions. The primary source of IMF lending resources is the financial contributions or quota subscriptions of its member nations. A country’s proportion of quota, or quota share, broadly reflects its weight in the global economy; larger economies have larger quotas. A member’s quota also impacts the country’s voting power at the IMF. Countries with larger quotas, and thus larger financial commitments to the institution, have a greater say in how the IMF is run. The United States contributes $117 billion to the IMF quota (17.46%). In addition, the United States has contributed $44 billion to funds at the IMF that supplement quota resources.

The International Monetary Fund (IMF, the Fund), founded in 1945, is an international organization that works to ensure the stability of the international monetary system. The United States is a founding member of the IMF and the largest financial contributor. Congress helps shape the U.S. participation in the IMF through oversight, appropriations, and other legislation. Key issues for Congress include IMF support for Ukraine, possible IMF sanctions on Russia, China’s role at the IMF, and COVID-19 response efforts.

The IMF has reinvented itself several times since its creation. From 1946 to 1971, during the so-called Bretton Woods era, the IMF oversaw a system of fixed exchange rates pegged to the U.S. dollar, which was itself convertible into gold. When non-U.S. currencies suffered payments imbalances arising from their normal trading and financial relationships, the IMF provided short-term financing to cover temporary hard currency shortfalls. After the collapse of the Bretton Woods system of fixed exchange rates in 1971, IMF members enacted a comprehensive reform of the organization and its operations in 1975. The IMF transformed itself from being an organization focused exclusively on issues of foreign exchange convertibility and global monetary stability to one having a broader mandate: lending for a range of financial crises, including debt, currency, and banking crises, and engaging on a wide range of issues including capital flows, financial regulation, and surveillance of the global economy.

BEIRUT, June 29 (Reuters) - Lebanon's financial crisis has been aggravated by vested interests resisting crucial reforms, the International Monetary Fund (IMF) said on Thursday, warning that no action could lead the country "down an unpredictable road".

The nearly four-year economic meltdown has cost the local currency roughly 98% of its value, seen GDP contract by 40%, pushed inflation into triple-digits and drained two-thirds of the central bank's foreign currency reserves, the IMF said.

COLOMBO, July 1 (Reuters) - Sri Lanka's parliament approved a domestic debt restructuring plan on Saturday that is crucial to continue a $2.9 billion bailout from the International Monetary Fund (IMF).

The plan passed with a majority of 122 votes in the 225-member parliament.

BUENOS AIRES, July 7 (Reuters) - The Argentine government will send a delegation next week to Washington in a bid to finalize the renegotiation of its $44 billion loan with the International Monetary Fund (IMF), a source involved in the talks told Reuters on Friday.

The delegation had initially planned to travel as early as June.

LONDON, July 11 (Reuters) - The Bank of England may have to keep interest rates high for an extended period if inflation pressures persist, and it was right to raise them by half a percentage point last month, the International Monetary Fund's directors said on Tuesday.

British inflation was the highest of any major economy in May at 8.7%, and financial markets have priced in increasingly high peaks for BoE rates as wage and price data have come in hotter than expected in recent months.

WASHINGTON (Reuters) - Raising the retirement age and scrapping regressive taxes such as deducting the interest on mortgages can help richer governments address income inequality without straining their pocketbooks, IMF staff said in a paper on Thursday.

In recent months, the International Monetary Fund has taken an increasingly vocal stance on the widening gaps between rich and poor nations. IMF staff say they have focused more on inequality due to interest from the Fund’s 188 member countries.

From a global perspective, uncoordinated tax interactions among independent jurisdictions, with their different objectives, often lead to unsatisfactory outcomes. To illustrate, if a country lowers its tax on capital, it attracts tax bases from other countries in the form of real capital or “paper” profits, even without real capital movement (that is, profit shifting). The corresponding contraction in the other countries’ tax base lowers those countries’ tax revenues. Also, spillovers do not end with profit and capital movements. The other countries are under pressure to lower their capital taxes, too, with further repercussions. A similar interaction can occur in the context of taxing the rich. This “race to the bottom”—which can result in inefficiently low taxation and hence insufficient public investments and social expenditures (Keen and Konrad 2013)—has been reflected in the downward trends of corporate and top personal income tax rates (Figure 2.1).

Depending on context and specifics, international coordination on the level or location of taxation can improve global outcomes with or without disadvantaging some countries. In federations, tax competition can be alleviated, and compensation can take place through fiscal transfers between subnational governments or through central policies. However, countries need to find common ground in coordination and be guided by economic assessment to understand global and country-specific effects. The ideal assessment entails comparing coordination options not only with the status quo, but also with counterfactuals of futures, with and without coordination. For example, unchanged policies may be more beneficial now but less beneficial in the future relative to coordinated outcomes.

The pandemic, war in Ukraine, the threat to food security, and the resurgence of global poverty. Heatwaves, droughts, and other extreme weather events. These are not random shocks. Nor are they a perfect storm in the conventional sense, a one-off conjuncture of bad events. We face instead a confluence of lasting structural insecurities—geopolitical, economic, and existential—each reinforcing the other. We have entered a perfect long storm.

We cannot wish away these insecurities or hope that problems that occupy one part of the world will not rebound on others. COVID-19 and its repeated mutations have brought that reality home, at immense human and economic cost everywhere. We can only restore optimism by recognizing the gravity and collective nature of the threats we face and organizing ourselves more effectively to address them.

Between 1999 and 2013, 79 Supreme Court rulings have had identifiable effects on the market, the study found. In all, those 79 rulings lead to more than $140 billion in absolute changes in wealth. The most impactful cases resulted in companies' stocks soaring, or plummeting, by billions in a matter of hours.

Billion Dollar Cases