Leaders of the world’s 20 largest economies have warned that global growth needs to be shared more equally to stop mounting concerns over globalization and free trade.
“Growth has been too low for too long for too few,” said Christine Lagarde, managing director of the International Monetary Fund, after the G-20 summit ended on Monday in Hangzhou, China. “There was also a determination around the room to better identify the benefits of trade in order to respond to the populist backlash against globalization.”
G-20 leaders adopted the Hangzhou Consensus of policy measures to transform the leading economies in a more innovative and sustainable manner. “We will work to ensure that our economic growth serves the needs of everyone and benefits all countries,” the G-20 communique said.
Pushing back against protectionism and pushing forward with free and fair trade is a vital component of this growth agenda, said Ms. Lagarde, but she acknowledged “that growth must be more widely shared.”
“Countries should deploy proven tools to reduce excessive inequality and raise economic prospects, particularly for low-income groups and workers affected by rapid technological change – for example, through skills training and investments in education and health. We need increased growth, but it must be better balanced, more sustainable, and inclusive so as to benefit all people,” she said.
This theme was also reflected in the G-20 tax initiatives.
“We will continue our support for international tax cooperation to achieve a globally fair and modern international tax system and to foster growth, including advancing on-going cooperation on base erosion and profit shifting (BEPS), exchange of tax information, tax capacity-building of developing countries and tax policies to promote growth and tax certainty,” the G-20 communique noted.
Earlier this year, the G-20 finance ministers, with the support of the Organisation for Economic Cooperation and Development, launched a debate on the role that tax policy can play in achieving sustainable, balanced and inclusive growth.
Based on a package of measures that addressed the erosion of countries’ tax bases and multinationals shifting profits from where they are generated to jurisdictions with low or no income taxes, the OECD established the G-20/OECD Inclusive Framework on BEPS.
So far, 85 countries and jurisdiction have joined the body and committed to implement the BEPS measures.
In his presentation to the G-20, OECD Secretary-General Angel Gurria said, “The Inclusive Framework on BEPS will be instrumental in turning the BEPS package into reality and establishing a level playing field as we move forward.”
Mr. Gurria further stated that the global standard for automatic exchange of information, the Common Reporting Standard, “is proving to be a game-changer in terms of deterring, detecting and addressing tax evasion.”
“With the first automatic exchanges under the OECD CRS beginning in September 2017, tax evaders are coming forward to declare previously undeclared accounts and assets.”
Countries have already identified almost 55 billion euros (US$62 billion) in additional revenues through voluntary disclosure programs and other initiatives targeting offshore evasion, he noted.
Tax transparency initiatives reached a new milestone in August when the number of participants in the multilateral Convention on Mutual Administrative Assistance in Tax Matters exceeded 100 jurisdictions.
In the closing statement, G-20 leaders supported the implementation of the BEPS measures and called on all relevant countries and jurisdictions that have not yet committed to the BEPS package to do so and join the framework “on an equal footing.”
“We … reiterate our call on all relevant countries including all financial centers and jurisdictions, which have not yet done so, to commit without delay to implementing the standard of automatic exchange of information by 2018 at the latest and to sign and ratify the Multilateral Convention on Mutual Administrative Assistance in Tax Matters,” the G-20 statement said.
The summit charged the Financial Action Task Force and the Global Forum with making initial proposals at the G-20 Finance Ministers and Central Bank Governors meeting in October on ways to improve the implementation of the international standards on transparency, including on the availability of beneficial ownership information of legal persons and legal arrangements, and how this information can be exchanged internationally.
The G-20 further asked the OECD to produce a list of countries that have not sufficiently implemented tax transparency standards in time for the July 2017 G-20 Leaders’ Summit, where “defensive measures will be considered against listed jurisdictions.”