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Simeon Djankov

Simeon Djankov

Simeon Djankov, nonresident senior fellow at the Peterson Institute for International Economics, was deputy prime minister and minister of finance of Bulgaria from 2009 to 2013. In this capacity, he represented his country at the Ecofin meetings of finance ministers in Brussels. Prior to his cabinet appointment, Djankov was chief economist of the finance and private sector vice presidency of the World Bank.

Articles by Simeon Djankov

Brexit Readiness Update: The Players Improved Their Score

December 20, 2017

In the past three months the possibility for an orderly Brexit has increased markedly. In particular, the European Union and United Kingdom have negotiated a transition period lasting two years. And several thorny issues around the treatment of EU citizens in the United Kingdom have been clarified.
The inaugural Brexit Readiness Score gave low grades on the preparedness of the UK government in nearly all areas, cumulating to an aggregate score of 9 out of 100 points. After progress in several areas over the past quarter, the aggregate score has gone up to 22.
This is the first quarterly update of the index to track progress. Based on available data, each component is scored on a scale of 0 (no progress) to 10 (full readiness). The 10 components are:
1. Access to European Markets – Tracks

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United States Is Outlier in Tax Trends in Advanced and Large Emerging Economies

November 2, 2017

In this comparative analysis of tax systems in advanced and large emerging economies, the United States stands out as an anomaly. Over the past 30 years the average corporate income tax rate in the 46 countries studied has fallen to about 20 to 25 percent, nearly every country has introduced carbon taxes, and personal income taxes have stabilized around 35 to 45 percent. By contrast, the US tax system relies primarily on high direct personal and corporate taxes and has no value-added tax (VAT) or carbon tax. The US Congress should cut the corporate tax rate by 10 to 15 percentage points, to reach the OECD average and boost US competitiveness. Lawmakers can further consider a shift to indirect taxes like the VAT, to make up for revenues that would be lost under a reduced corporate tax

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Brexit Readiness Score

September 20, 2017

If you believe Prime Minister Theresa May, the United Kingdom will be ready to exit the European Union in April 2019. If you believe UK businesses, Britain is falling behind in its preparations. The next round of Brexit negotiations, and the first since the summer recess, was delayed by a week to September 25, 2017, suggesting that businesses may be right.
Two other announcements in September have questioned Brexit readiness. First, the head of the UK’s Revenue and Customs service warned that the agency may need an extra 5,000 staff members and an increased annual budget of $650 million to $1 billion to manage the post-Brexit customs regime. These resources are not foreseen in the government’s public accounts. Second, a survey commissioned by the Port of Dover estimated “the impact [of

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Make in India: Tax Reform as Job Creation

August 10, 2017

By 2050, at least 280 million young people will enter the job market in India. Yet India is losing 550 manufacturing and service jobs per day as it adopts new technologies. A new countrywide value-added tax that supersedes India’s numerous indirect taxes may deliver over 10 million new jobs and temporarily alleviate pressure on the labor market.
India is frequently cited among the countries that stand to lose the largest number of jobs due to new technologies. A 2016 World Bank study, for example, estimates that 42 percent of formal sector jobs in India will be obliterated at the current pace of wage increases and technology adoption. Many of these jobs are occupied by well-paid accounting, logistics, and call-center professionals, who are part of global value chains.
To counter this

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Tempered Ambitions on US Tax Reform

August 8, 2017

At 35 percent, the United States has the highest statutory corporate income tax rate among advanced economies. Reform of the widely criticized corporate tax is among the top agenda items of the Trump administration and the Republican leadership of Congress, and even many Democrats say the time has come to revamp the tax to make US-based multinational corporations more competitive in the global economy. Yet after seven months in power, Trump administration officials are signaling tempered expectations on the possibility for change.
The initial stated goal was to reduce the federal corporate income tax rate to 15 percent from the current 35 percent. A multitude of problems stand in the way of such an overhaul, such as whether the change in the tax code will add to the federal deficit,

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The United Kingdom’s Loss Is Europe’s Gain

June 1, 2017

One year after Brexit was approved by British voters, the United Kingdom is no longer as attractive to European nationals for work and living as it was in prior years. The May 2017 figures published by the Office for National Statistics show that compared to 2015, there is a 36 percent increase in the number of EU citizens leaving the United Kingdom to return home permanently (to 117,000) and a 14 percent decrease in first-time EU entrants to the UK job market (to 247,000). This negative trend is particularly pronounced for Central Europeans, who have stopped relocating to the United Kingdom. The United Kingdom’s loss is Europe’s gain: Students and workers look for opportunities at home or in other European economies. This trend increases the long-term growth prospects for Europe, at the

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Corporate Tax Cuts: Examining the Record in Other Countries

May 4, 2017

At 35 percent, the United States has the highest statutory corporate income tax rate among advanced economies, and this high rate coexists with a number of large preferences and exceptions. Reform of the widely criticized corporate tax is among the top agenda items of the Trump administration and the Republican leadership of Congress, and even many Democrats say the time has come to revamp the tax to make US-based multinational corporations more competitive in the global economy. Djankov analyzes episodes of tax rate cuts in other advanced economies and finds that radical corporate tax cuts, of 15 or more percentage points, are rare, but modest cuts of about 10 percentage points are possible in normal economic conditions and practical to implement as they do not trigger large fiscal

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Will Brexit Hurt the City of London?

March 6, 2017

Peterson Institute For International Economics
The Peterson Institute for International Economics is a private nonpartisan nonprofit institution for rigorous, intellectually open, and indepth study and discussion of international economic policy.

Headquarters
1750 Massachusetts Avenue, NWWashington, DC 20036

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The City of London after Brexit

February 23, 2017

In March 2017 the UK government will formally begin the process of ending its membership in the European Union. According to estimates presented in this Policy Brief, the direct negative effect of Brexit on the financial sector in the City of London will be a 12 to 18 percent loss of revenue and a 7 to 8 percent drop in employment, clearly significant effects. The UK government may revisit some of its financial regulation in an effort to bring in more investment. Djankov warns that such a policy move may trigger a regulatory race with other major financial markets, harming the global financial system. In the meantime, uncertainty surrounding the transition from the European Union and the possible changes in the UK government’s regulatory stance will deter new business. The biggest

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Trump Spells Trouble for Eastern Europe

January 30, 2017

In his first week in office President Donald Trump created plenty of anxiety in other countries. Mexico was the initial casualty of his announced policy shift towards tariffs on foreign goods, but several other countries, from Germany to Vietnam, were named on his "watch" list because of their trade surpluses with the United States. Eastern Europe is missing so far from this list, but the region will suffer the effects of Trump’s new policies in at least three ways.
First, Trump has called on other NATO members to up their military expenditures to the prescribed 2 percent of GDP threshold. Currently, only Estonia and Poland meet this level. The average military expenditure for Eastern Europe was 1.2 percent of GDP in 2016, with Bulgaria and Romania at 1.4 percent, the Czech Republic at 1.2

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How to Increase Productivity in Eastern Europe

November 28, 2016
How to Increase Productivity in Eastern Europe

Like its Western neighbors, Eastern Europe is victim to a pervasive demographic challenge—the retirement of a growing number of elderly must be financed by a tax base of increasingly fewer younger workers.
In order to compensate for these conditions, East European economies must redouble their efforts to boost productivity. All EU member states in Eastern Europe have used the European Union’s so-called convergence funds to invest heavily in infrastructure, on-the-job training, and upgrading industrial technology to facilitate productivity growth. And for a decade, starting in 1999, these investments paid off, with labor productivity rising above 5 percent per annum (figure). The euro area crisis reversed this trend, and productivity growth has not recovered to precrisis levels.
Labor

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Eastern Europe’s Lethargic Economies

November 21, 2016

Eastern Europe’s economies are not catching up with their Western neighbors as quickly as many had hoped. The latest Eurostat figures on economic growth in Europe, released earlier this month, show a troubling trend. While growth is returning to Europe after several difficult years, Eastern Europe is not converging with “old Europe,” the pre-2004 EU members.
In 2016, only three East European economies—Bulgaria, Romania, and Slovakia—are on pace to exceed 3 percent annual GDP growth. Estonia, Croatia, Latvia, Lithuania, Hungary, and Slovenia are all growing more slowly than the euro area average. Even Poland, the perennial star performer, is barely above the EU growth average of 1.8 percent of GDP in 2016. This lack of economic vigor is surprising, as Eastern Europe has enjoyed significant

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How Will Russia’s Economy Survive 2016?

January 20, 2016

A global excess of cheap oil and poor governance have left Russia in a deep economic slump that shows few signs of abating soon. The country’s 2016 federal budget is calculated based on oil prices at $50 a barrel. Even at that level, the government r…

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When Currencies Collapse

December 30, 2015

In late December, the Azerbaijani currency, the manat, lost a third of its value in a single day. This was after the central bank decided to float the manat, which had previously been fixed to the dollar. The move has angered the population and made …

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Eastern Europe Benefits from a Stronger Dollar

December 17, 2015

The much-anticipated increase in US interest rates is finally here. With it comes the expectation that growth in emerging markets will suffer, as these economies bear the brunt of the additional cost to rising debt. But one region seems largely immun…

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Euro-Dollar Parity Again?

November 30, 2015

The euro is again heading towards parity with the dollar—after 13 years. The currency ended last week at 1.059 to the dollar. That’s up from a 2015 low of $1.0458 in March. The euro was last at dollar parity in December 2002, having peaked at $1.60 i…

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Polish Elections: Their Likely Effect on Economic Growth

October 29, 2015

Economic growth in Poland is likely to slow down as a result of new policies that the incoming government has vowed to implement. The center-right Law and Justice party won the October 25 elections with nearly 40 percent of the vote, becoming the fir…

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Korgas: Backpackers Give Way to Cargo Trains

October 26, 2015

Until recently, Korgas, a border town between Kazakhstan and China, was known among backpackers as the most corrupt international crossing on their way through Asia. One backpacker describes her experience: “Once the money was handed over, we unsurpr…

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Reviving the Silk Road: Not Just Hardware

October 20, 2015

The New Silk Road initiative has caught the imagination of politicians across eastern Europe, with the investments it may bring and the prospect of cheap financing. Through it, China offers countries on the land and maritime transport corridors that …

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