Rationality of Direct Tax Revenue Forecasts under Asymmetric Losses: Evidence from Swiss Cantons

The current debt crisis has shed light on the importance of accurate fiscal forecasts. In particular, the accuracy of revenue forecasts is central since they set the limit within which expenditure should remain in order to reach fiscal balance. Therefore, forecasting tax revenue accurately is a key step in the implementation of sound fiscal policies. The current paper contributes to the empirical literature on budget predictions by providing new evidence about Swiss cantons. Using data from 26 Swiss cantons over 1944-2010, we apply the method developed by Elliott et al. (2005) to test the rationality of direct tax revenue forecasts. We mainly find that 1) when considering the percent forecast error, loss functions are asymmetric in a majority of cantons, 2) allowing for asymmetric losses, results of rationality tests are substantially altered in the sense that more cantons turn out to produce rational forecasts 3) when considering forecasts of growth rates, almost no evidence of asymmetric loss function is found and finally 4) forecasts of tax revenue growth rate turn out to be rational in a higher number of cantons than forecasts of levels of tax revenue

Incentive Effects of Fiscal Rules on the Finance Minister's Behaviour: Evidence from Revenue Projections in Swiss Cantons

Predicting available tax revenue accurately is a key step of fiscal policy. It has recently been shown that revenue prediction errors have a direct impact on fiscal deficits. In the current paper we explore the relationship between the ideology of the finance minister and tax revenue projection errors and assess how the stringency of fiscal rules does alter this relationship. We use a panel dataset on 26 Swiss cantons over the period 1980-2007 as well as a new dataset on 99 finance ministers at the cantonal level. We find a rather counter-intuitive positive relationship between the ideology of the finance minister and tax revenue projection errors in the sense that a more left wing finance minister produces relatively more conservative forecasts. We also find that fiscal rules reduce the effect of ideology on tax revenue projection errors. These results suggest that left wing finance ministers need to curb deficits relatively more in order to signal the same level of competence than a right wing finance minister to the voters. It also suggests that fiscal rules render the signal less informative to the voters and thereby reduce the incentive for left wing finance ministers to be more conservative in their projections

Hosting Multinationals: Economic and Fiscal Implications

Switzerland is a prime location for both domestically owned as well as foreign-owned multinational enterprises (MNEs). In this paper, we review the literature on MNE activity with respect to its main fundamental (non-policy) drivers, the non-fiscal consequences of MNEs for various economic aggregates, and the fiscal implications associated with the operation of foreign affiliate networks. In particular, the paper puts emphasis on the fiscal implications of hosting MNEs and their relation to the current tax environment in Switzerland

Development and integration of high straightness flexure guiding mechanisms dedicated to the METAS watt balance Mark II

There is a firm will in the metrology community to redefine the kilogram in the International System of units by linking it to a fundamental physical constant. The watt balance is a promising way to link the mass unit to the Planck constant h. At the Federal Institute of Metrology METAS a second watt balance experiment is under development. A decisive part of the METAS Mark II watt balance is the mechanical linear guiding system. The present paper discusses the development and the metrological characteristics of two guiding systems that were conceived by the Laboratoire de Systemes Robotiques of EPFL and built using flexure mechanical elements. Integration in the new setup is also described

Introducing an IP Licence Box in Switzerland: Quantifying the Effects

In response to the increasing international pressure on Switzerland to reform the ring-fenced elements in its tax system, the Swiss Government has put forward a comprehensive tax reform package. The proposal comprises, among other things, the introduction of a licence box, a substantial reduction in the cantonal profit tax rates and an allowance for excess corporate equity. We apply a computable general equilibrium model to quantify the economic effects of this reform. Our results reveal that the licence box, combined with the reduction in the cantonal profit tax, limits the outflow of the tax base of those companies that benefit from the current preferential tax treatment. The reduction in the cantonal profit tax and the fact that regularly taxed companies also benefit from the licence box render the reform package costly, such that the tax revenues will decline after the reform