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Thinking Outside the Box to Revitalise the Global Economy



Thinking Outside the Box to Revitalise the Global Economy 1

The global economy is facing the worst downturn in more than a century. Rob Mander, RSM International’s International Tax Services Leader, says countries will not be able to tax their way back to prosperity, and it’s time for leaders to think outside the box.

With the International Monetary Fund’s most recent projections indicating a 3% contraction in the global economy, we are facing the worst global economic downturn since the Great Depression that followed the notorious Wall Street Crash of 1929.

Following the 2008 global recession, the likes of France and Italy established economies that relied heavily on taxation in their journey back to economic stability. While the economic contraction might be similar to the Great Depression, the structure of the global economy has changed substantially in the last 100 years and the way governments tax and spend has changed to match it. Governments will find that the sheer volume of expenditure they have implemented during the pandemic will not be recoverable from higher taxes in the same way as before. As we begin to look ahead to a post-COVID-19 society, global leaders will need to look beyond conventional taxation as they begin to restart their economies.

Multi-party solutions

As economies have weakened during the COVID-19 crisis, those in intersecting sectors must work together to find the best solution to the problems that have arisen as a result. These solutions require the interests of financiers, property owners, employers, and employees to be balanced. We refer to these as ‘multi-party solutions’ and they have already become a necessary part of establishing a sense of order as society has adapted to the ‘new normal’ which will continue during the recovery period that will follow. A fundamental example is the shift to working from home. This unplanned change in working patterns has relieved pressure on public transport systems, reduced the use of city centre office space and provided employees and employers with equal power in negotiating new ways of working. In the future, this may be more effective than congestion taxes in managing city traffic whilst also improving business productivity. If so, the tax system of the future may need to be adjusted to incentivise employers (potentially via payroll and social security tax concessions) to continue with these arrangements.

However, the downsides of working from home are experienced by transport and infrastructure providers (with fewer people traveling) and property owners (with a potential reduction in the demand for city centre offices). In the short term this has placed enormous stress on the commercial and residential real estate sector as financiers, landlords, and tenants have entered negotiations and as job losses and financial instability left increasing numbers of tenants unable to pay their rent. In Australia and Singapore, for example, policy makers have started to provide support for tenants and maintain stability in the property market. In the longer-term tax measures may be needed to assist the adjustment in the property and infrastructure sectors with accelerated tax write-offs for new asset expenditure and new incentives to invest in new property and infrastructure projects.

Another good example can be found in the gig economy. This economy relies on entrepreneurship, innovation, and a group of people ready and willing to invest time in developing and testing new ideas. In 2018, it was estimated the global gig economy spending totalled $4.5 trillion and rising. However, as countries around the world have been forced into economic hibernation, new research has shown 68% of gig workers have been left unable to earn, with limited access to employment and healthcare benefits. With the gig economy having taken a heavy blow, there is an urgent need for multiple parties to unite, working together to support and stimulate growth whilst protecting gig workers during the difficult times that lie ahead. Start-ups grants, incentives and tax holidays supported by policy makers and large business co-funding should be considered as levers that can be used to accelerate the growth of the new gig economy. The products and services it creates will be a vital part of stimulating future growth.

Balancing investment and spending

Every government has two major levers to control the economy, taxation and spending. These two levers need to be used in concert to both balance a nation’s books, and secure long-term growth. Post-pandemic, taxes will need to be used in tandem with spending to counteract long-term budget deficits. The balance between tax cuts in key sectors, rises in others while still finding the room for investment spending is an intricate economic puzzle—not to mention a highly political decision.

Tax reductions often apply where a country sees the greatest potential for short term growth. In Germany and Austria reduced VAT rates have been applied to restaurant meals to stimulate demand, while Norway has introduced a package of tax breaks designed to stimulate investment in its oil and gas industries. In addition, allowing loss making companies to “’ash out’ deductions for capital expenditure has been suggested as a way to generate an immediate boost to business that wouldn’t be a viable option otherwise, given their losses during the COVID-19 lockdown period. Singapore, for instance, has announced a proposal to allow some limited carryback of tax losses—another immediate measure to allow business to generate cash where a previously tax paying business has gone into loss.

In addition to these changes in tax, further practical measures must also be explored as economies fire back up. The current pandemic has seen small and middle market businesses face extreme financial hardship, leaving many struggling to survive as investment has plummeted. However, the innovative concepts and technology found within some of these businesses are crucial to their nation’s future economic prosperity. Governments must recognise that capital investment and R&D are crucial cornerstones necessary to their economic recovery, with smaller, pioneering enterprises having an important part to play. Indeed, some national governments have already begun to provide support to those succumbing to the pressures of the pandemic. In the U.K., a 500 million pounds ($630 million) co-investment ‘Future Fund’ has been created to provide vital investment into the most innovative businesses. Canada has introduced a ‘Futurepreneur & Industrial Research Assistance Programme’ to support innovators and other early stage development firms that may not qualify for other wage subsidies in Canada but nevertheless need support for their innovation activities to continue. In addition, Norway, recognising the broader trend towards renewables and sustainability, has announced funding for green technology and research and development into alternative energies.

On a larger scale, the German and French governments have presented a joint plan to the European Commission for a 500 billion euro ($566 billion) coronavirus recovery fund. This plan proposes that grants are provided to affected business and so is a welcome boost to assist in the re-growth of economic activity that will be needed in the EU. The upcoming holiday season in the northern hemisphere will provide an immediate report card on the impact of travel restrictions, shutdowns, and on-going social distancing. Likely, the task ahead will be huge, particularly for tourism dependent countries and regions.

Finally, policy makers must decide how to pay for this new expenditure and make up for tax breaks. In Hungary, for instance, the government plans to fund the recovery in part by taxing large retailers. Given the already rapid growth in online retail, which has been accelerated by COVID-19, it seems this is a push against a very strong tide and would be unlikely to meet the test of encouraging investment and consumption in the economy. A more fundamental change that has been suggested is to remove the tax deduction for debt funding. The removal of such tax advantages would align debt with equity and thereby remove the ability for companies to overgear, which we saw occur following the global financial crisis of 2009. With globalisation taking a practical and political hit during the COVID-19 pandemic, one tempting area to increase revenues will be trade barriers. This could be a dangerous move, however, new tariffs will mean higher prices, reduced international trade and shorter, less sophisticated supply chains.

A new tax mix

Tax policy adapts at a notoriously slow pace. The current international tax system is cobbled together by retrofitting old ideas to work with new business models, endlessly tweaking rates and adding exceptions. This is a prime opportunity for a new mixture of taxes to be introduced that better reflects our digitally driven economies, environmental priorities, and the imperative of economic growth.

Many countries around the world were already trying to balance economic and environmental priorities through new sustainable taxes. COVID-19 is likely to have reset some priorities (particularly in the short term) but the underlying public demand to support renewable energy and sustainability more generally is likely to again become a factor as we emerge from the crisis. As airlines have buckled under the pressure and have reached out to governments for financial support there have been calls for these rescue packages to come with green strings attached. New taxes that address issues such as global warming, conservation, and environmental preservation will need to be brought into the tax mix.

In addition, the role of global digital companies has become even more central to economic activity as business and social activity has become increasingly dependent on their services during the crisis. As a result, digital services taxes will become pivotal to recouping expenditure. However, this proved a highly contentious topic prior to the pandemic, with countries, including the U.K. and France, implementing or planning their own digital taxes while the OECD continued to persuade countries of the importance of a global solution. Now, as the digital economy has flourished over the past few months, we are likely to see more resistance to change from the larger economies who are home to the global tech behemoths. As governments begin to reshape their economies in the wake of COVID-19, it is likely they, and regulators, will prioritise other ventures. However, for developing countries that do not have the same sources of funding as larger economies (via taxation and debt markets) digital taxation will be even more important. Reflecting this mindset, the OECD, while still pushing for a global digital decision by end of 2020, has deferred the delivery of a political decision from July to October.


As we all enter the next phase of this new world, governments will need to explore new, unchartered territory when it comes to policy and taxation in order build strong economic foundations for the years ahead. Sectors will need to adapt and learn to work together, while governments must navigate this new landscape while striking a balance that re-stabilises national finances. At a global level, institutions like the OECD are to play a vital role in establishing a new system of taxation that aligns with the digital age we live in. Challenges lie ahead, but with global unity and innovative thinking, we will emerge with infrastructures that are stronger and more resilient.

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ECB launches small climate-change unit to lead Lagarde’s green push



ECB launches small climate-change unit to lead Lagarde's green push 2

FRANKFURT (Reuters) – The European Central Bank is setting up a small team dedicated to climate change to spearhead its efforts to help the transition to a greener economy in the euro zone, ECB President Christine Lagarde said on Monday.

Lagarde has made the environment a priority since taking the helm at the ECB, taking a number of steps to include climate considerations in the central bank’s work as the euro zone’s banking watchdog and main financial institution.

She is now creating a team of around 10 ECB employees, reporting directly to her, to set the central bank’s agenda on climate-related topics.

“The climate change centre provides the structure we need to tackle the issue with the urgency and determination that it deserves,” Lagarde said in a speech.

She said that climate change belonged in the ECB’s remit as it could affect inflation and obstruct the flow of credit to the economy.

The ECB said earlier on Monday it would invest some of its own funds, which total 20.8 billion euros ($25.3 billion) and include capital paid in by euro zone countries, reserves and provisions, in a green bond fund run by the Bank for International Settlement.

More significantly, ECB policymakers are also debating what role climate considerations should play in the institution’s multi-trillion euro bond-buying programme.

So far the ECB has bought corporate bonds based on their outstanding amounts but Lagarde has said the bank might have to consider a more active approach to correct the market’s failure to price in climate risk.

“Our strategy review enables us to consider more deeply how we can continue to protect our mandate in the face of (climate) risks and, at the same time, strengthen the resilience of monetary policy and our balance sheet,” Lagarde said.

(Reporting by Balazs Koranyi; Editing by Francesco Canepa and Emelia Sithole-Matarise)

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What to expect in 2021: Top trends shaping the future of transportation



What to expect in 2021: Top trends shaping the future of transportation 3

By Lee Jones, Director of Sales – Grocery, QSR and Selected Accounts for Northern Europe at Ingenico, a Worldline brand

The pandemic has reinforced the need for businesses to undergo digital transformation, which is pivotal in the digital economy. In 2020, we saw the shift to online and cashless payments accelerated as a result of increased social distancing and nationwide restrictions.

The biggest challenge on all businesses into 2021 will be how they continue to adapt and react to the ever changing new normal we are all experiencing. In this context, what should we expect this year and beyond, in terms of developments across key sectors, including transport, parking and electric vehicle (EV) charging?

Mobility as a service (MaaS) and the future of transportation

Social distancing and lockdown measures have brought about a real change in public habits when it comes to transportation. In the last three months alone, we have seen commuter journeys across the globe reduce by at least 70%, while longer-distance travel has fallen by up to 90%. With it, cash withdrawals for payment has drastically reduced by 60%.

Technological advancements, alongside open payments, have unlocked new possibilities across multiple industries and will continue to have a strong impact. Furthermore, travellers are expecting more as part of their basic service. Tap and pay is one of the biggest evolutions in consumer payments. Bringing ease and simplicity to everyday tasks, consumers have welcomed this development to the transport journey. In-app payments are also on the rise, offering customers the ability to plan ahead and remain assured that they have everything they need, in one place, for every leg of their journey. Many local transport networks now have their own apps with integrated timetables, payments, and ticket download capabilities. These capabilities are being enabled by smaller more portable terminals for transport staff, and self-scanning ticketing devices are streamlining the process even further.

Lee Jones

Lee Jones

Ultimately, the end goal for many transport providers is MaaS – providing an easy and frictionless all-encompassing transport system that guides consumers through the whole journey, no matter what mode of travel they choose. Additionally, payment will remain the key orchestrator that will drive further developments in the transportation and MaaS ecosystems in 2021. What remains critical is balancing the need for a fast and convenient payment with safety and data privacy in order to deliver superior customer experiences.

The EV charging market and the accelerating pace of change  

The EV charging market is moving quickly and represents a large opportunity for payments in the future. EVs are gradually becoming more popular, with registrations for EVs overtaking those of their diesel counterparts for the first time in European history this year. What’s more, forecasts indicate that by 2030, there will be almost 42 million public charging points deployed worldwide, as compared with 520,000 registered in 2019.

Our experience and expertise in this industry have enabled us to better understand but also address the challenges and complexities of fuel and EV payments. The current alternating current (AC) based chargers are set to be replaced by their direct charging (DC) counterparts, but merchants must still be able to guarantee payment for the charging provider. Power always needs to be converted from AC to DC when charging an electric vehicle, the technical difference between AC charging and DC charging is whether the power gets converted outside or inside the vehicle.

By offering innovative payment solutions to this market segment, we enable service operators to incorporate payments smoothly into their omnichannel customer experience that also allows businesses to easily develop acceptance and provide a unique omnichannel strategy for EV charging payments. From proximity to online payments, it will support businesses by offering a unique hardware solution optimized for PSD2 and SCA. It will manage both near field communication (NFC) cards and payments from cards/smartphones, as well as a single interface to manage all payments, after sales support and receipt with both ePortal and eReceipts.

Cashless options for parking payments

The ‘new normal’ is now partly defined by a shift in consumer preference for cashless, contactless and mobile or embedded payments. These are now the preferred payment choices when it comes to completing the check-in and check-out process. They are a time-saver and a more seamless way to pay.

Drivers are more self-reliant and empowered than ever before, having adopted technologies that work to make their life increasingly efficient. COVID-19 has given rise to both ePayment and omnichannel solutions gaining in popularity. This has been due to ticketless access control based on license plate recognition or the tap-in/tap-out experience, as well as embedded payments or mobile solutions for street parking.

These smart solutions help consider parking services more broadly as a part of overall mobility or shopping experience. Therefore, operators must rapidly adapt and scale new operational practices; accept electronic payment, update new contactless limits, introduce additional payments means, refund the user or even to reflect changing customer expectations to keep pace.

2021: the journey ahead

This year,  we expect to see an even greater shift towards a cashless society across these key sectors, making the buying experience quicker and more convenient overall.

As a result, merchants and operators must make the consumer experience their top priority as trends shift towards simplicity and convenience, ensuring online and mobile payments processes are as secure as possible.

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Opportunities and challenges facing financial services firms in 2021



Opportunities and challenges facing financial services firms in 2021 4

By Paul McCreadie, Partner at ECI Partners, the leading growth-focused mid-market private equity firm

Despite 2020 being an enormously disruptive year for businesses, our latest Growth Index research reveals that almost three quarters (74%) of mid-market financial services companies remained resilient throughout the pandemic.

This is positive news, especially when taking into account the economic disruption that financial services firms have had to go through since the crisis began. No doubt 2021 will also hold its own challenges – as well as opportunities – for firms in this sector.

Challenges outlook

Unsurprisingly, the biggest short-term concern for financial firms for the year ahead involved changing pandemic guidance, with 42% citing this as a top concern. With the UK currently experiencing a third lockdown many financial services businesses will have already had to adapt to rapidly changing guidance, even since being surveyed.

Businesses will also be considering the need to invest in working from home operations, and there may be uncertainty over re-opening offices on a permanent basis.  According to the research 30% of financial services firms are planning to adopt remote working on a permanent basis, so decisions need to be made now about whether they invest more in enabling staff to do this, or in their current office premises.

Due to Brexit, UK financial services firms are no longer able to passport their services into Europe, which may cause problems, particularly in the next 12 months as the Brexit deal is ironed out and the agreement is put into practice. Despite this, Brexit was only cited by 24% of financial firms as a short-term concern. While it’s comforting to see that UK financial firms aren’t hugely concerned about Brexit at this juncture, it is going to be vital for the ongoing success of the industry that the UK is able to get straightforward access to Europe and operate there without issue, otherwise we may see these concern levels rise.

Looking ahead to longer-term concerns for financial services businesses, the top concern was global economic downturn, of which 40% of firms cited this as a worry when looking beyond 2021.

Investing and adopting tech

Traditionally, the financial services sector has been slow to adopt digital transformation. Issues with legacy systems, coupled with often large amounts of data and a reluctance to undertake potentially risky change processes, have meant many firms are behind the curve when it comes to technology adoption. It’s therefore promising to see that so much has changed over the last year, with 45% of financial services firms having invested in AI and machine learning technology – making it the top sector to have invested in this space over the last 12 months.

One business that exemplifies the benefits of investing in machine learning is Avantia, the technology-enabled insurance provider behind HomeProtect. The business has undergone a large tech transformation in the last few years, investing in an underlying machine learning platform and an in-house data science team, which provides them with capabilities to return a quote to over 98% of applicants in under one second. This tech investment has allowed them to become more scalable, provide a more stable platform, improve customer service and consequently, grow significantly.

This demonstrates how this kind of tech can help businesses to leverage tech in order to offer a better customer experience, and retain and grow market share through winning new customers. This resilience should combat some of the concerns that firms will face in the next year.

Additionally, half (51%) of financial services firms have invested in cybersecurity tech over the last year, which allows them to protect the platforms on which they operate and ensure ongoing provision of solutions to their customers.

International resilience

Clearly, there is a benefit of international revenues and profits on business resilience. In practice, this meant that businesses that weren’t internationally diversified in 2020 struggled more during the pandemic. In fact, the businesses considered to be the least resilient through the 2020 crisis were three times more likely to only operate domestically.

Perhaps an attribute towards financial services firms’ resilience in 2020, therefore, was the fact that 53% already had a presence in Europe throughout 2020 and 38% had a presence in North America. This internationalisation gave them an advantage that allowed them to weather the many storms of 2020.

Looking at how to capitalise on this throughout the rest of 2021, half (51%) of are planning overseas growth in Europe over the next 12 months, and 43% in North America. Further plans to expand internationally is not only a good sign for growth, but should further increase resilience within the sector.


While there are many concerns, the fact that financial services businesses are investing in technology like AI and machine learning, as well as still planning to grow internationally, means that they are providing themselves with the best chances of dealing with any upcoming challenges effectively.

In order to maintain their growth and resilience throughout the next 12 months, it’s imperative that they continue to put their customers first, invest in technology and remain on the front foot of digital change.

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