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Arturo Bris: Taxes in the New Era - Level UP Ukraine 2017

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The ChangingGame of Global Competition
Arturo Bris – Professor of Finance
Director, IMD World Competitiveness Center

Published in: Business
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Arturo Bris: Taxes in the New Era - Level UP Ukraine 2017

  1. 1. © 2017 IMD – International Institute for Management Development. Not to be used or reproduced without permission. Arturo Bris – Professor of Finance Director, IMD World Competitiveness Center The Changing Game of Global Competition
  2. 2. © IMD 2017 Ask an Economist  “…if Clinton wins it should be up about 3 percent and if Trump wins, it should go down 7 percent"  Eric Zitzewitz, Economics Professor at Dartmouth College, at NBC on Nov 3
  3. 3. © IMD 2017  Source: Datastrea m 80 85 90 95 100 105 110 Index,Nov8=100 Stock Markets Afer Trump WORLD EMERGING MARKETS EUROPE USA CHINA MEXICO In Annualized Terms (Nov 8-Nov 23) WORLD +31.5% CHINA +29.7% USA +96.2% ASIA PACIFIC -18.5% EUROPE -49.7% EMERGING -70.7% MEXICO -98.3%. Ask an Economist
  4. 4. © IMD 2017 Between 1000 AC and 1930 real World GDP per capita increased by a factor of 3 21 over the 20th century In the first decade of the 21st century, the population of the world has produced more economic output than in the first 19 centuries of the common era combined. World GDP per capita has increased by a factor of 4
  5. 5. © IMD 2017 We are living in the best of times Source: McKinsey Global Institute 5
  6. 6. © IMD 2017 Massive increase in productivity of labor 6 Labor productivity per person employed in 2016 US$ (Annualized) Source: Corporate Board $ 0 $ 20 000 $ 40 000 $ 60 000 $ 80 000 $ 100 000 $ 120 000 $ 140 000USDperPerson,Constant2016 Productivity of Labor United States Germany Switzerland United Kingdom Brazil Japan China India Ukraine
  7. 7. © IMD 2017 Why? Technology of course 7
  8. 8. © IMD 2017 Productivity Puzzle 8 % Increases in Labor productivity per person employed in 2016 US$ (Annualized) Source: Corporate Board -5% -3% -1% 1% 3% 5% 7% 9% United States Germany Switzerland United Kingdom Brazil Japan China India Ukraine Productivity of Labor Growth 1950-1960 1961-1970 1971-1980 1981-1990 1991-2000 2001-2010 2011-2017
  9. 9. © IMD 2017 Hypotheses  Data is wrong  We work less  Even though we produce more, what we produce is cheaper  We work in less productive jobs  It is the 2008 crisis  Services are less productive than manufacturing  Technology does not make us more productive  …or, at most, technology only make some companies more productive 9
  10. 10. © IMD 2017 Hypotheses  Data is wrong  We work less  Even though we produce more, what we produce is cheaper  We work in less productive jobs  It is the 2008 crisis  Services are less productive than manufacturing  Technology does not make us more productive  …or, at most, technology only make some companies more productive 10
  11. 11. © IMD 2017 Source: The Guardian 11
  12. 12. © IMD 2017 Hypotheses  We work less  Even though we produce more, what we produce is cheaper  We work in less productive jobs  It is the 2008 crisis  Services are less productive than manufacturing  Technology does not make us more productive  …or, at most, technology only make some companies more productive 12
  13. 13. © IMD 2017 Jobs and Automation Source: PWC 13
  14. 14. © IMD 2017 Hypotheses  We work in less productive jobs  It is the 2008 crisis  Services are less productive than manufacturing  Technology does not make us more productive  …or, at most, technology only make some companies more productive 14
  15. 15. © IMD 2017 Crisis? 15 0% 2% 4% 6% 8% 10% 12% 0 100 200 300 400 500 600 PercentofAssets ThousandDollars General Electric - Productivity and Investment Sales per Employee (Left Scale) Capex to Assets (Right Scale)
  16. 16. © IMD 2017 Hypotheses  It is the 2008 crisis  Services are less productive than manufacturing  Technology does not make us more productive  …or, at most, technology only make some companies more productive 16
  17. 17. © IMD 2017 17 $0 $500 $1 000 $1 500 $2 000 $2 500 $3 000 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Revenues per Employee Google Apple Novartis Nestlé Number of Employees 1982-2016: Apple: +42% Nestlé: +129%
  18. 18. © IMD 2017 18 -5% -3% -1% 1% 3% 5% 7% 9% 11% 1980-1990 1990-2000 2000-2010 2010-2016 Revenues per Employee - % Change Apple Nestlé
  19. 19. © IMD 2017 19 -5% 0% 5% 10% 15% 1980-1990 1990-2000 2000-2010 2010-2016 Profits per Employee - % Change Apple Nestlé
  20. 20. © IMD 2017 McKinsey: “Our productivity estimates assume that people displaced by automation will find other employment.” “Although automation is a global phenomenon, four economies—China, India, Japan, and the United States—account for just over half of the total wages and almost two-thirds the number of employees associated with activities that are technically automatable by adapting currently demonstrated technologies” 20
  21. 21. © IMD 2017 The Impact of Automation on Jobs 21 100 200 Analog Economy Digital Economy
  22. 22. © IMD 2017 The Impact of Automation on Jobs 22 100 200 100 Average Productivity: 100 0 Average Productivity: 200 Analog Economy Digital Economy
  23. 23. © IMD 2017 The Impact of Automation on Jobs 23 100 100 100 200 20 50 Average Productivity: 100 Average Productivity: 90 Analog Economy Digital Economy
  24. 24. © IMD 2017 Google “Playmobil Finance Professor” 24
  25. 25. © IMD 2017 Salaries 25 Thecompensation-productivitygap:avisualessay SusanFleck,JohnGlaser,andShawnSprague
  26. 26. © IMD 2017 Taxes 26 5 7 9 11 13 15 17 19 Tax Revenues (% of GDP) Euro area OECD members United States
  27. 27. © IMD 2017 Taxes 27 0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 40,0 45,0 France Germany Japan Switzerland United Kingdom United States OECD Average Taxes Around the World Taxes on corporate income as % of total taxation 1980 Taxes on corporate income as % of total taxation 2014 Taxes on personal income as % of total taxation 1980 Taxes on personal income as % of total taxation 2014
  28. 28. © IMD 2017 Taxes 28 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Effective Tax Rates Alphabet Apple Altria Group Novartis
  29. 29. © IMD 2017 Technology is going to create a massive gap between the rich and the poor (Switzerland and Burundi), but also between technologically-advanced countries (China and the US), and the rest The gap is self-perpetuating because fiscal rules will continue penalizing labor and production against technology in all countries. Moreover, technology creates monopolies, and therefore market power and rents. 29
  30. 30. © IMD 2017 30
  31. 31. © IMD 2017 Technology is mobile, and so is employment
  32. 32. © IMD 2017 I tell you what will NOT work  Collaborative Economy 32
  33. 33. © IMD 2017 I tell you what will NOT work  Collaborative Economy  Investor Activism  Protectionism  Taxes  A halt to automation 33
  34. 34. © IMD 2017 Scary? Source: Kai-Fu Lee “The Real Threat of Artificial Intelligence,” New York Times June 24, 2017 34
  35. 35. © IMD 2017 In Summary 2008 Today Corporate Profits GDP Wages

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