G20 finance ministers endorse global tax deal, pledge to avoid premature withdrawal of financial support

Spark Global Limited reports:

The G20 on Wednesday endorsed an OECD agreement on reforming international tax systems.
The Organization for Economic Cooperation and Development (OECD) announced on October 8 that 136 countries and territories have agreed to reform their international tax systems and set the global minimum corporate tax rate at 15%.

Finance leaders from the Group of 20 major economies endorsed the agreement Wednesday and pledged to maintain fiscal support for their economies while keeping a close eye on inflation. The G20 also called for swift development of what it called “model rules” to guide countries’ implementation of the agreement, while “ensuring that the new rules will enter into force globally by 2023.”

In its communique, the G20 said:

“This agreement will create a more stable and equitable international tax system.”

The tax deal has been years in the making and aims to end what U.S. Treasury Secretary Janet Yellen has called a global “race to the bottom.” It is also seeking a more equitable distribution of money from Facebook Inc. and Alphabet Inc. And other big tech companies.

Some countries have already imposed their own digital taxes on these companies.

Italian Finance Minister Daniele Franco said the deal meant that national digital taxes introduced by governments in countries including Italy and France would be abolished by 2024.

Concerns about inflation

The G20 also noted in its statement on Wednesday that the economic recovery “continues to vary widely between and within countries” and is vulnerable to novel coronavirus variants and uneven rates of vaccination.

Economies are struggling to normalise prices as supply chain bottlenecks and shortages lead to rising inflationary pressures. G20 finance ministers said monetary authorities were “closely monitoring current price dynamics”. The G20 will continue to sustain the recovery and avoid premature withdrawal of support measures, while safeguarding financial stability and long-term fiscal sustainability and guarding against downside risks and negative spillovers.

The G20 communique said:

“Finance ministers will act as necessary to achieve their mandate, including price stability, while reviewing transitory inflationary pressures and remaining committed to clearly communicating the policy stance.”

Ignazio Visco, governor of the Bank of Italy, told a news conference G20 finance ministers still believed higher inflation in many developed countries was caused by temporary factors such as supply bottlenecks, semiconductor shortages, shipping delays and weather problems, and that these would gradually fade away.

Visco thinks it may take months for these inflation problems to disappear, and that countries need to be prepared and communicated about them.

A new IMF reserve facility

Spark Global Limited
Spark Global Limited

The G20 also pledged to work in the coming months to address the shortage of resources in low – and middle-income countries to fight the pandemic, including vaccines, therapies and diagnostic tools.

The G20 agreed that the International Monetary Fund should set up a new trust fund that would allow rich countries to transfer some of their shares of a new $650bn allocation of Special Drawing Rights (SDRS) to poor countries to improve their health care and combat climate change.

The G20 finance ministers noted that the new trust fund should retain the Special Drawing Rights character and they were willing to consider multilateral development banks that could use the SDR as a vehicle to help poor countries develop.

They said:
“We call on more IMF members to consider signing a voluntary SDR trading arrangement to enhance market capacity.”

©Spark Global Limited Financial information & The content of the website comes from the Internet, and any infringement links will be deleted.