224 Module 8 The International Monetary System and Financial Forces TABLE 8 .4 Inflation Rates for Various Countries, Years 2011–2013 Country 2011 Rate 2012 Rate 2013 Rate Argentina 17.3 15.3 25.0 est. Brazil 7.0 5.3 5.9 Chile 3.4 1.8 3.0 China 7.8 1.8 2.5 Egypt 11.7 12.4 8.5 est. France 1.3 1.5 0.69 Germany 1.2 1.5 1.43 Greece 1.0 20.8 21.71 India 8.5 7.2 9.13 Ireland 0.7 0.7 0.2 Japan 21.9 20.9 1.61 Norway 6.7 2.8 2.04 Russian Fed. 15.5 8.5 6.48 UK 2.3 1.7 2.00 U.S. 2.0 1.7 1.50 Venezuela 28.1 14.1 56.2 Zimbabwe 7.9 5.9 8.3 est. Source: World Bank, Data: Inflation http://data.worldbank.org/indicator/NY.GDP.DEFL.KD.ZG people, or companies in another tax jurisdiction. Countries establish bilateral tax treaties to categorize passive-income withholding rates. For example, on interest paid to residents of non-tax-treaty countries, the United States withholds 30 percent as withholding tax. So from UK residents, it withholds nothing, while from residents of Pakistan it withholds 30 percent. International companies need to understand tax laws in each country in which they operate and how those tax laws relate to tax laws in other countries. This additional tax burden can create financial risk, but it can also be an opportunity for savings, given good tax planning. INFLATION AND INTEREST RATES Inflation is a sustained increase in prices. Some economists hold that it is caused by demand’s exceeding supply, while others view the cause to be an increase in the money supply. All, however, agree that in an inflationary economy, prices as a whole increase. Table 8.4 shows recent inflation levels in selected countries. Japan, the EU, and the United States have had relatively good records in keeping inflation down in recent years. Historically, Latin American countries have had inflation troubles. However, these trends have been gradually reversed. Brazil experienced 3,118 percent inflation in 1990 and was able to decrease it to 5.9 percent in 2010, although it is still a challenge. The overall highest rate recorded was found in Zimbabwe, where inflation reached 14.9 billion percent in July 2008. Most inflation is measured by a consumer price index (CPI), which captures the price changes over time for a basket of consumer goods. The world’s average inflation rate for 2013 was 3.9 percent, calculated by the World Bank.
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