There is a large body of literature indicating that the financial decisions of firms are systematically affected by company taxation (see Graham, 2003, for a comprehensive survey). Most importantly, interest on debt is deductible from the tax base, while the return on equity is not and, therefore, firms have an incentive to raise leverage above the optimal level without taxation.
The tax-induced advantage of debt increases with the statutory corporate tax rate, and it exists irrespective of whether a firm is owned by a domestic or a foreign shareholder. A multinational firm, however, is able to minimize its tax payments by allocating debt over all locations where it operates. The tax savings due to debt shifting depends on the differential between the parent and the host country statutory corporate tax rates. Accordingly, multinationals can reduce their tax payments by shifting debt from a low-tax jurisdiction to a high-tax jurisdiction taking advantage of the high-interest deduction in the high-tax jurisdiction (see, e.g., Mintz and Smart, 2004, for a theoretical analysis).
The assignment I accepted for this paper is not straightforward. The task is to provide a policy maker’s perspective on some lessons from the great financial crisis for monetary policy. Having studied earlier challenging episodes in monetary history, I am well aware of the pitfalls of attempting to draw lessons from a crisis while the experience is still raw. Better to wait a decade or more, to have time to evaluate with greater clarity whether, how and under what conditions things could have evolved differently. On the other hand, there is no time to waste on suggested improvements in the policy framework if the objective is to improve the odds of better outcomes for the future. What better opportunity to offer some early thoughts on the lessons, then, than the occasion presented by this colloquium honouring Lucas Papademos, taking place right after the last meeting of the Governing Council of the European Central Bank (ECB), before the end of his tenure as Vice-President of this institution.
I focus on three issues. First, what lessons can be drawn regarding the institutional framework for monetary policy? Has the experience changed the pre-crisis consensus that monetary policy is best performed by an independent central bank focused on achieving and maintaining price stability? Should central banks be more or less independent? Should their aim be higher inflation instead of price stability, as some suggest?
Integrated circuit cards (ICC) or smart cards are credit-card sized plastic cards embedded with a memory chip for data storage and optionally a microprocessor to provide processing capabilities. Smart cards which provide only data storage capabilities are known as memory based smart cards; while smart cards which also have processing capabilities are known as microprocessor based smart cards. A microprocessor based smart card executes a software component such as an operating system and hence complex logic and algorithms can be built into it. In this document, the term “smart card” shall be used to refer implicitly to a microprocessor based smart card. The interaction with a smart card is carried out using a specialized hardware called an interface device (IFD) or a smart card reader as a more commonly used name. A smart card does not have its own power supply and needs an external power source to power it up. This external power is supplied by the smart card reader. The communication between a smart card and a reader can occur either in contact mode or in contact less mode. In contact mode, the contact card is inserted into the reader with a mating contact and the electric circuit completed due to this physical contact is used to power up the card. In contact less mode, the contact less card is placed in the RFID field of the reader which is then used to power up the card. Smart cards are small and easy to handle devices which make them very usable in everyday applications.
Security is a major concern in many everyday applications like e-Commerce etc. Most of these applications require secure and confidential data exchange, mechanisms to detect tampering/modification of data, verification of origin integrity etc. Various cryptographic mechanisms are required to establish a secure trusted environment or to operate securely in a non-trusted medium. These requirements can be addressed by use of either symmetric-key based or asymmetric-key based cryptographic techniques. A public key infrastructure (PKI) is a framework which uses the capabilities of performing asymmetric key cryptography, also known as public key cryptography (PKC). PKC involves a pair of cryptographic keys called private and public keys.
