Making Sense of a Oris
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oecd Model Tax Convention at 50 T Do multinationals pay more? I Tax burden nears peak Why university league tables score low Putting development aid to work No 269 October 2008 www.oecdobserver.org Making sense of a oris 1-22/73 P (E) 3 NO. 269 OCT 2008 The Siemens answer: An efficient energy conversion chain with the world's most efficient combined cycle gas turbine, saving up to 40,000 tons of C02. Delivering environmentally friendly energy means: generating and transmitting power more efficiently while enabling a reliable distribution. Being the only company worldwide that offers solutions covering the entire energy conversion chain, we develop innovative ways to reduce emissions: for instance our newest gas turbine which will enable the combined cycle plant in Irsching, Germany to save up to 40,000 tons of C02 per year while powering a city of 3 million people. www.siemens.com/answers Answers for the environment. SIEMENS 1 CONTENTS Observer No 269 October 2008 LETTERS U-IUI DEVELOPMENT Food crisis solution; Taxing truth 22 Make aid work Latin America: Rebalancing the wealth of nations EDITORIAL Javier Santiso From the financial crisis to the economic downturn: Restoring Thoughts on the crisis, page 7 growth is a key challenge Angel Gurria OECD.ORG Ministerial Council: Outreach, reform and the economics of NEWS BRIEF climate change 4-5 UK warned on corruption; Gender 30 US presidents visit; OECD Forum; gap persists; Tax progress mixed; Don't forget the planet!; Critical Economy; News shorts (healthcare, Internet pollution, education, migration); Soundbites; Plus ça change... Tax celebration, from page 10 31 Thomas Bata; Recent speeches by Angel Gurria; New ambassadors ECONOMY 32 Calendar; Frankie.org Financial crisis and the economy Interview with Klaus Schmidt-Hebbel BOOKS Save our savings 33 Learning the future; Ethical 10 OECD Model Tax Convention: recruitment Why it works Making aid work, page 22 Jeffrey Owens and Mary Bennett 34 New publications on SourceOECD 1 2 A model to celebrate 37 Focus on taxation Peter A. Barnes, General Electric 38 Fishy terms ORDER FORM.. .ORDER FORM... SOCIETY 1 5 Do multinationals promote better DATABANK pay and working conditions? Ministerial Council highlights, page 29 41 Alexander Hijzen and Paul Swaim Healthy economy?; F igher prices J2 Economic indicators 18 Education: Breaking ranks ft I oecd 44 Tax burden nears pee k; Importing Observer low skills www.oecdobserver.org On the cover The financial crisis sweeping world markets is the worst since the Great Depression. As the crisis bites into the real economy, hard Making sense of a crisis lessons are being learned. Understanding causalities is a pre-condition By OECD Observer for good policymaking, since bubbles and crises will occur again if ©Darren Whiteside/Reuters the sources are not addressed directly. The ultimate goal of our actions is to avoid a wide, protracted global economic downturn, restore the conditions for growth and ensure this crisis cannot be repeated. OBSERVER Letters Your key to the OECD v.oecdobserver.org D OECD 2008 2008 subscription raie: - US$82 - £43 - ¥8 900 ISSN 0029-7054 Tel.; +33 (0) ] 45 24 80 66 Fax: +33(0) 1 45 24 82 10 Subscribe to the OECD's award winning* magazine today at www.oecdobserver.org/subscribe.html or use the order form [email protected] on page 38. OECD in Figures, the original pocket databook, free with every subscription. Founded in 1962 "Highly Commended Award 2002 from the Association of teamed and Professional Society Publishers. The magazine of the Organisation for Economie Co-operation and Development Food crisis solution wisely in agriculture, we can Financial Centre which has overcome the world food crisis rapidly emerged as a key global OECD Publications As your commentary "Food 2 rue André-Pascal Pnces: The Grain of Truth" and reduce chronic poverty and player. 75775 Paris cedex 16, France obse rvcr@oecd .org rightly points out, the response hunger in the long run. It has benefitted also from the www.oecd.org to the food crisis should expansion in Islamic finance. involve both short and long- Shenggen Fan and Mark Published in English and French This has helped to revitalise by OECD and term strategies, including Rosegrant Pressgroup Moldings Europe SA International Food Policy Labuan, Brunei and Bahrain. San Vicente, 16-6-3 policies that foster growth and Research Institute But we are also seeing the 46002 Valencia, Spain development and improve Tel.: +34 96 303 1000 Washington, D.C. emergence of four centres in the Fax.: +34 96 303 1234 agricultural productivity Caribbean Trinidad <Sr Tobago, [email protected] (No 267, May-June 2008). Taxing truth Jamaica, Barbados and the EDITOR-IN-CHIEF: RoryJ. Clarke Increased agricultural growth is Dominican Republic. ASSISTANT EDITOR: Joan Tassy Your commentary on hannful WRITERS: Lyndon Thompson, important to overall economic tax practices raises a series of Stephen Di Biasio For all of these centres, EDITORIAL ASSISTANTS: growth and will help to points about the commercial independent venfication ol their Madeleine Barry, Alison Benney, achieve the first Millennium imperatives for international Amanda Sudic, Loïc Verdier standards of governance plays a Development Goal of halving the financial centres (No 267, May- ILLUSTRATIONS: André Faber, critical part in their reputation. proportion of poor and hungry June 2008). Although the David Rooney, Stik PHOTO RESEARCH: Silvia Thompson people by 201ft. OECD's attentions at the outset LOGISTICS: Jochen Picht The Liechtenstein affair has may have been unwelcome, its highlighted the ongoing battle Pressgroup: A recent study by the discipline has played a key part PUBLISHER: Angus McGovem International Food Policy over banking secrecy. This will ADVERTISING DIRECTOR: Liam Murray in stimulating the greatest period not be resolved in the short Research Institute finds that the of innovation and creativity in Applications for permission to reproduce or term. Few emerge from this translate all or parts of articles from the global incremental public jurisdictions. Governments, OECD Observer, should be addressed to: affair with great credit. Certainly investment required the financial sector regulators and the tax authorities who paid The Editor, additional amount necessary product and service providers OECD Observer, to meet MDG1 would be substantial sums of money for 2 rue André-Pascal, have been obliged to work closer stolen information have 75775 Paris, cedex 16, France. US$14 billion annually for all together to provide attractive established a poor precedent. developing countries. For Sub- packages which are compliant All signed articles and letters express Saharan Africa alone, ihe with international standards. Equally, the two other remaining the opinions of the authors and do not estimated incremental annual centres on the OECD's blacklist necessarily represent the opinion of (Andorra and Monaco) need to the OECD. investments required range from The bnghtest minds working in $3.8 billion to $4.8 billion. The centres have developed new consider where their future lies. Reprinted and translated articles should carry the required growl h and financial funds regimes, the zero-ten credit line "Reprinted from the OECD Observer'', The commercial realities are plus dale of issue. Signed articles reprinted must resources vary based on past corporate lax scheme, new trust bear the author's name. Two voucher copies structures and simpler more such that a capacity lor should be sent to the Editor, All correspondence progress in poverty reduction innovative and relevant should be addressed to the Editor. The and the role of agriculture in the effective compliance formats. Organisation cannot be responsible for returning regulation is a powerful weapon unsolicited manuscripts. overall economy. The atmosphere has become more competitive. Some centres in securing long-term, high- While the challenge of meeting have closed because they were quality business. PRESS MDG 1 is considerable under unable to support the cost of GROUP, the current circumstances, if compliance. But new ones have Bob Reynolds national governments and their emerged. The supreme example BusinessIFC.com development partners invest is the Dubai International [email protected] li. OECD Observer No 269 October 2008 EDITORIAL From the financial crisis to the economic downturn Restoring growth is a key challenge \f Angel Gurria, Secretary-General of the OECD The financial cnsis sweeping world markets is the worst since the Now, we must ensure that the rescue packages work, so that lending Great Depression. While the crisis is biting into the real economy, resumes and payments systems are secured. For this, markets must recover hard lessons are being learned. How should policymakers move some normality, while avoiding excessive volatility forward, particularly as room for manoeuvre is being squeezed? We must also think about the long term, and OECD is working alongside The size and duration of the crisis remain uncertain, but the cost is governments, central banks and international institutions in advancing the immense, in subprime losses, wiped-out stocks, rescue packages and reforms in regulatory and accounting standards, lending practices and more. corporate governance needed to address the crisis. We should also respond to the call of political leaders to rethink the global economic governance The OECD has from the outset welcomed the systemic rescue plans infrastructure, in order to increase its effectiveness and legitimacy in the US and Europe. By injecting liquidity, providing guarantees, dealing with troubled assets and recapitalising the banking system, Overall, a more holistic culture of risk management, compensation issues these actions should help relaunch bank lending and get the economy and responsible, ethical and accountable management must be forged, going again. grounded in better regulatory structures and stronger implementation of agreed standards, such as the OECD Principles of Corporate Governance, We have seen boom and bust cycles before, but these are exceptional as well as improved financial education and risk awareness among all users circumstances.