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Europe > Switzerland

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Cover IMF Working Papers
Home or Away? Profit Shifting with Territorial Taxation
Dominika Langenmayr
and
Ms. Li Liu
In 2009, the United Kingdom abolished the taxation of profits earned abroad and introduced a territorial tax system. Under the territorial system, firms have strong incentives to shift profits abroad. Using a difference-in-differences research design, we show that the profitability of UK subsidiaries in low-tax countries increased after the reform compared to subsidiaries of non-UK multinationals in the same countries by an average of 2 percentage points. This increase in profit shifting also leads to increases in measured productivity of the foreign affiliates of UK multinationals of between 5 and 9 percent.
Keywords:
profit shifting; territorial tax system; multinational firms; shifted profit; UK multinational; UK subsidiary; difference-in-differences research design; Total factor productivity; Transnational corporations; Corporate income tax; Income; Wages; Global
Cover IMF Working Papers
Why U.S. Immigration Matters for the Global Advancement of Science
Ruchir Agarwal
,
Patrick Gaulé
, and
Geoff Smith
This paper studies the impact of U.S. immigration barriers on global knowledge production. We present four key findings. First, among Nobel Prize winners and Fields Medalists, migrants to the U.S. play a central role in the global knowledge network—representing 20-33% of the frontier knowledge producers. Second, using novel survey data and hand-curated life-histories of International Math Olympiad (IMO) medalists, we show that migrants to the U.S. are up to six times more productive than migrants to other countries—even after accounting for talent during one’s teenage years. Third, financing costs are a key factor preventing foreign talent from migrating abroad to pursue their dream careers, particularly for talent from developing countries. Fourth, certain ‘push’ incentives that reduce immigration barriers—by addressing financing constraints for top foreign talent—could increase the global scientific output of future cohorts by 42 percent. We concludeby discussing policy options for the U.S. and the global scientific community.
Keywords:
Immigration; Science; Talent; Universities; WP; IMO medalist; migrants to the U.S.; IMO participant; productivity regression; IMO point; Migration; Productivity; Income; Global
Cover IMF Staff Country Reports
Switzerland: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper on Switzerland models the evolving behavior of the Swiss franc relative to the world’s major reserve currencies and considers possible reasons for the shifts. Economic fundamentals, including country-partners and currency of denomination of Swiss trade and finance, are likely to affect which currencies the franc co-moves with, although these factors tend to change only slowly. The behavior of the Swiss franc may have also been affected by the global financial crisis and its aftermath, as well as the shift in recent years from synchronized to divergent monetary policies by the major central banks. Identifying reserve currency blocks and the de facto behavior of currencies is an ongoing pursuit. The two dimensions of exchange regimes—the anchor currency (basket) and the degree of exchange rate flexibility—should be identified simultaneously. The implied regimes align well with Switzerland’s de facto exchange rate arrangements and monetary policy frameworks. The approach used in this paper identifies how the franc co-moves with the major reserve currencies but is agnostic about the driving forces behind these moves.
Keywords:
ISCR; CR; wage; franc; currency; SNB; monetary policy; brake rule; wage gap; gap vis-à-vis; liquidity mismatch; long-run wage-productivity relationship; SNB's FX purchase; reserve portfolio; wage Phillips curve; Currencies; Wage gap; Wages; Labor productivity; Real wages; Global; Europe; Eastern Europe
Cover IMF Staff Country Reports
Cross-Country Report on Inflation: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper examines the causes and drivers of low inflation in European inflation targeting countries outside the euro area, focusing on the Czech Republic, Poland, Sweden, and Switzerland. It estimates the effects on inflation from the output gap and external factors, including oil price changes, nominal effective exchange rate (NEER) fluctuations, and euro area inflation spillovers. It is observed that external factors have been significant drivers of low inflation recently, though their contributions to inflation and the channels through which they operate vary across countries. Policy responses and options are also discussed, taking into account country-specific circumstances.
Keywords:
ISCR; CR; inflation expectation; CPI inflation response; inflation objective; inflation falling; inflation fluctuation; inflation shock; inflation spillover; inflation targeters; inflation tolerance band; medium-term inflation expectation; noncore inflation; protracted inflation shock; inflation response; euro area inflation spillover; area inflation spillover; central bank; low inflation; Inflation; Exchange rates; Output gap; Oil prices; Central bank policy rate; Global
Cover IMF Working Papers
Okun's Law: Fit at 50?
Laurence M. Ball
,
Mr. Daniel Leigh
, and
Mr. Prakash Loungani
This paper asks how well Okun’s Law fits short-run unemployment movements in the United States since 1948 and in twenty advanced economies since 1980. We find that Okun’s Law isa strong and stable relationship in most countries, one that did not change substantiallyduring the Great Recession. Accounts of breakdowns in the Law, such as the emergence of“jobless recoveries,” are flawed. We also find that the coefficient in the relationship—the effect of a one percent change in output on the unemployment rate—varies substantially across countries. This variation is partly explained by idiosyncratic features of national labormarkets, but it is not related to differences in employment protection legislation.
Keywords:
WP; absolute value; Unemploymnent; Okun’s law; Economic fluctuations; Law captures factor; Law coefficient; unemployment rate; coefficient estimate; estimates of Okun's Law; unemployment-output relationship; unemployment-employment relation; Unemployment; Employment; Unemployment rate; Output gap; Employment protection
Cover IMF Staff Country Reports
Japan: Selected Issues
International Monetary Fund
This Selected Issues paper examines the factors behind the recent surge in capital flows in Japan. The paper presents econometric evidence on the influence of these capital flows on the medium-term dynamics of the yen. It finds that in the case of the yen–dollar rate, nontrade factors affecting capital flows are likely to delay the adjustment of the yen-dollar rate to its long-term equilibrium value. The paper also draws on recent international experiences and trends to identify and review some of the key tax issues and options for meeting these challenges.
Keywords:
ISCR; CR; yen; bank; Japan; exchange rate; City bank; yen-dollar rate; regional bank; yen-U.S. dollar adjustment; Trust bank; yen-dollar exchange rate; Commercial banks; Information technology in revenue administration; Exchange rates; Corporate income tax; Productivity; Global; Asia and Pacific; North America; Central and Eastern Europe
Cover IMF Staff Country Reports
Switzerland: Financial Sector Assessment Program: Technical Note: The Swiss Banking System: Structure, Performance, and Medium-Term Challenges
International Monetary Fund
This technical note discusses the banking system structure, performance, and medium-term challenges for Switzerland. The note discusses that the Swiss banking sector has been undergoing a substantial consolidation over the last 10 years, but retains a rich collection of institutional types operating in various business segments. Consolidation has been partly driven by competitive pressures following the burst of the housing market bubble and entailed a substantial reduction in the number of institutions and branches. Smaller banks have been also developing owing to various types of cost-sharing arrangements.
Keywords:
ISCR; CR; bank segment; cantonal bank; Raiffeisen bank; bank concentration ratios; TE estimate; bank assets; Commercial banks; Foreign banks; Total factor productivity; Productivity; Cooperative banks; Global
Cover IMF Staff Country Reports
Switzerland: Selected Issues
International Monetary Fund
This Selected Issues paper takes a close look at the proximate determinants and short-term dynamics of inflation in Switzerland. It identifies salient features of the inflation experience in Switzerland. The paper uses a wage-price model to gauge the sensitivity of inflation to the business cycle and the exchange rate. The findings suggest that underlying inflation of about 1 percent reflects a slightly higher rate for domestic goods and services and low increases in prices of imported goods.
Keywords:
ISCR; CR; price; monetary policy; inflation expectation; goods inflation; widening output gap; target inflation; low-inflation record; inflation-control target range; Inflation; Price stabilization; Exchange rates; Output gap; Short term interest rates; Global
Cover IMF Working Papers
Growth in Switzerland: Can Better Growth Be Sustained?
Mr. Anastassios Gagales
Swiss growth performance in the past quarter century has been mediocre. The paper finds that conditional income convergence contributes significantly to slow growth and the poor performance of the domestically oriented sectors has been a drag on growth. However, slow growth is not inescapable. Faster growth would require raising total factor productivity growth, which remains low by international standards, and the investment rate. Further progress in structural reform could sustain the underlying growth rate at about 2 percent in the next few years.
Keywords:
WP; productivity growth; Switzerland; economic growth; investment rate; high-productivity sector; productivity gain; enterprise restructuring; aggregate productivity growth; Productivity; Total factor productivity; Labor productivity; Manufacturing; Employment; Global
Cover IMF Staff Country Reports
Switzerland: Selected Issues
International Monetary Fund
This Selected Issues paper examines economic growth in Switzerland. It attempts to analyze whether slow growth is inescapable for Switzerland. The paper suggests that income convergence across countries contributes significantly to slow relative growth in Switzerland, but experience in several advanced industrial countries reinforces the view that slow growth is not inescapable. Higher growth will require raising total factor productivity growth, which remains low by international standards, and to a lesser extent, raising the investment rate.
Keywords:
ISCR; CR; Switzerland; capital; net; productivity growth; phasing-out wealth taxes; capital transaction tax; investment rate; interest income; productivity gain; capital tax burden; Productivity; Total factor productivity; Pension spending; Labor productivity; Employment; Global