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Tariff

Often used to describe a tax on goods produced abroad imposed by the GOVERNMENT of the country to which they are exported. Many countries have reduced such tariffs as part of the process of freeing up world trade.

Tax base

The thing or amount to which a tax rate applies. To collect INCOME TAX, for example, you need a meaningful definition of INCOME. Definitions of the tax base can vary enormously, over time and among countries, especially when tax breaks are taken into account. As a result, a country with a comparatively high tax rate may not have a high TAX BURDEN if it has a more narrowly defined tax base than other countries. In recent years, the political unpopularity of high tax rates has lead many governments to lower rates and at the same time broaden the tax base, often leaving the tax burden unchanged.

Technical progress

A crucial ingredient of economic GROWTH. Economists often used to take a certain rate of technological progress for granted, but in new ENDOGENOUS growth theory they make more effort to measure accurately and better understand what causes differences in the rate of technical change.

Transfer pricing

The PRICES assumed, for the purposes of calculating tax liability, to have been charged by one unit of a multinational company when selling to another (foreign) unit of the same firm. FIRMS spend a fortune on advisers to help them set their transfer prices so that they minimise their total tax bill. For instance, by charging low transfer prices from a unit based in a high-tax country that is selling to a unit in a low-tax country, a firm can record a low PROFIT in the first country and a high profit in the second. In theory, however, transfer prices are supposed to be set according to the arm's-length principle: that they should be the same as would be charged if the sale was to a business unconnected in any way to the selling firm. But when there is no genuinely independent market with which to compare transfer prices, what an arm's length price would be can be a matter of great debate and an opportunity for firms that want to lower their tax bill.

Transparency

A buzz word for the idea that the more INFORMATION is disclosed about an economic activity the better. Many regulators, private lenders, politicians and economists reckoned that the Asian economic crisis of the late 1990s would not have been so severe, or even have happened, had Asian governments, BANKS and other companies made available more and better data about their financial condition. Likewise, the collapse of Enron provoked demands for greater transparency, to help improve corporate governance in the United States and other industrialised countries. Some economists reckon that transparency is one of the most effective methods of REGULATION. Rather than risk REGULATORY CAPTURE, why not simply maximise disclosure and leave it to the market to decide whether what the information reveals is acceptable?

Treasury bills

A form of short-term GOVERNMENT DEBT. Treasury bills usually mature after three months. They are used for managing fluctuations in the government’s short-run cash needs. Most government borrowing takes the form of longer-term BONDS.

Trust

One of the most valuable economic assets, hard to create but easy to destory - a crucial ingredient of a country's social capital. People are more likely to do business together when they trust each other. Trust can reduce market failure that otherwise results from asymmetric information. When there is a lack of trust, people may have to spend heavily on monitoring others' behaviour to ensure they do what they say they will do. This cost may be so high that it is not worth going ahead with a business deal. When trust is absent, people may be less flexible in their dealings with each other. Countries can overcome some of the problems of a lack of trust by passing laws requiring good behaviour, but only to the extent that people trust that the laws will be enforced. One way in which companies seek to demonstrate that they can trust is by investing heavily in a brand.