Weekly Web Release
Excerpts from the Ministry's Weekly Web Release May 8, 2002.
Excerpts from the Ministry of Finance's Weekly Web Release
May 8, 2002
Changes in the division of labour between economic institutes
Changes intended in the division of labour between the National Economic Institute, Statistics Iceland and the Ministry of Finance's Economic Department, represent major changes in the operation of the Economic Department. Until now, its tasks have been as follows:
- Overseeing the revenue projection of the fiscal budget, surveillance of the development of revenue collection and participation in all major projects in the field of taxation. A major task associated therewith is the preparation of the main fiscal budget, the supplementary budget, as well as a monthly report on Treasury finances. Furthermore, the department prepares various tax surveys, and assesses the impact of changes in the tax system.
- General economic counsel to the Minister of Finance and the government. This applies to both policy formulation in government finances, and economic matters in general.
- Participation in international work that has increased progressively in recent years. This primarily applies to participation in regular cooperation in the field of economics and Treasury finances.
- General dissemination of information to domestic entities, in addition to special surveys and reports.
- Participation in a multitude of projects in the field of economics and government finances.
The changes ahead call for a complete reshuffle in the tasks of the Economic Department. There are two main contributing factors:
- A major increase in reviewing economic developments and forecasting prospects, including regular assessments and reports on all main sectors of the economy, the income prospects of households, foreign commerce as well as developments in the international economy.
- The construction of econometric models in the field of taxation, pensions, fisheries etc. This is an addition to the preparation already under way for an integral model for the revenue projections of the fiscal budget.
The changes aim at adopting an arrangement similar to the one already in use for a long time in other countries. It is considered quite natural for authorities to publish economic projections on the basis of their own economic policy, taking professional assessment of the economic environment and outlook in other respects into account. This arrangement has been criticised for rendering potentially unrealistic and insignificant projections. In the opinion of the Ministry of Finance, this criticism is not justifiable and out of step with economic realities of today. The crucial factor today is that the assumptions of all measures and plans - those of authorities, corporations, individuals and more - are transparent and accessible. In order to pave the way for this development the Ministry of Finance will attempt to ensure the access of all entities to not only to the forecasting assumptions, but also to the forecasting models themselves. This will encourage a healthy and unbiased discussion about the economy without accusations that certain economic projections are insignificant or politically tainted.
EEA-rules on government support for research and development
As is evident from recent discussion on a government guarantee for financing for the entry of deCode Genetics into the field of pharmaceutical development, Icelandic authorities have ascertained that such a government guarantee complies with EEA-rules on government support in the field of research and development. According to guidelines of the EFTA Surveillance Authority (ESA) in the field of government support, which especially treat government support for research and development, it is permitted to grant government support for such projects when certain conditions are fulfilled. When assessing the eligibility of a research and development project for government support, special consideration is given to the distance from the potential market, the project's initiative, that the activity in question is new within the company, how encouraging the government support is, access to the project's results, and any influence on competition.
In order to assess distance from the market, the ESA has defined three stages of projects depending on their distance from the market: fundamental research, industrial research and pre-competitive development activities. The further from the market the project in question is, the higher the government support can be as a proportion of the total investment. The requirement for new activity means that the intended project takes the company from its current activity to a new kind of activity, which it has not tended before. The project must also embody a certain degree of advancement within the field. The aim of government support should therefore be to make the intended research and development possible and attain its declared positive influence on the scientific society without harming competitive markets.
32 companies request permission to keep accounts in foreign currency terms
32 companies have applied to the Registration of Annual Accounts for a permit to keep accounts and draw up annual accounts in foreign currency terms. According to a recently passed law authorising the permit, companies generally need to apply for such a permit two months before the start of the accounting year for which it is intended to begin the accounting and drawing up annual accounts in foreign currency terms. But as the law presumed that companies could obtain this permit for the accounting year 2002, the application period was extended until April 30th this year for the accounting year 2002. It is especially interesting to see that 26 of these companies have requested to draw up accounts in US dollars, four in euros, one in pounds sterling and one in Norwegian kronur.
For comments and/or suggestions, send e-mail to:
"bolli.thor.bollason@fjr.stjr.is"
or contact the Ministry of Finance,
Weekly Web Release, Arnarhvoll, 150 Reykjavik, Iceland
