No. 107, May

One of the most important concerns of the new US Government is tax reform. High marginal effective tax rates, a laboriously defined tax base, complicated regulations and a large number of loopholes have led to high administrative costs. Discussions are focusing on destination-based cashflow taxation. This would ultimately place pressure on foreign companies to relocate production to the USA.

Recently, inflation rates in the eurozone have picked up again. Nevertheless, the core inflation rate remains low. To get a better understanding of the inflation dynamics, KOF has developed an inflation model, which shows that the inflation trend in the past few years was predominantly affected by the decline in oil prices. In the course of the eurozone’s economic recovery and the lapse of the second-round effects of the drop in energy prices, the core inflation rate is likely to rise again.

New research conducted by KOF in conjunction with the WIFO Institute in Austria and the ZEW Institute in Germany shows that energy policies can stimulate the adoption of green energy technologies without reducing companies’ national or international competitiveness.

In April 2017, the business situation of businesses in the private sector was significantly more favourable than during the previous month (see G 1). This means that businesses have been able to improve their situation continuously since the start of 2017. In addition, firms’ expectations concerning the course of business over the coming six months are more confident than previously. The Swiss economy has started the spring with a swing in its step.