Johannesburg, Nov 23: G20 leaders have committed to engaging constructively to address concerns regarding global minimum tax and tax challenges arising from digitalisation of the economy, while preserving the tax sovereignty of all countries.
In a declaration issued after the G20 Summit in South Africa, leaders of 20 developing and developed nations also called for a new OECD framework that will enable interested jurisdictions to strengthen international tax transparency on immovable property on a voluntary basis.
“We will continue engaging constructively to address concerns regarding Pillar Two global minimum taxes, with the shared goal of finding a balanced and practical solution that is acceptable for all as soon as possible,” said the G20 Summit declaration.
The Organisation for Economic Cooperation and Development (OECD)’s pillar 2 initiative sets a minimum tax rate of 15 per cent for every country that is signatory to it. There are concerns that the US domestic tax rules might conflict with this new global minimum tax.
US President Donald Trump on January 20 in a Presidential memorandum had said that the “Global Tax Deal has no force or effect within the United States”. This has led to countries evaluating the benefit of joining the tax deal with the US not being a part of it.
The G20 declaration said that the delivery of a solution will need to include a commitment to ensure any substantial risks that may be identified with respect to the level-playing field are addressed and will facilitate further progress to stabilise the international tax system, including a constructive dialogue on the tax challenges arising from the “digitalisation of the economy”.
“These efforts will be advanced in close cooperation across the membership of the OECD/G20 Inclusive Framework (IF), preserving the tax sovereignty of all countries,” the declaration said.
It further said there is an opportunity for the OECD/G20 BEPS (Base Erosion and Profit Shifting) Project come with a new OECD framework that will enable interested jurisdictions to strengthen international tax transparency on immovable property on a voluntary basis.
The G20 leaders agreed that domestic resource mobilisation is the most effective funding source, and a structured approach to reform which is “country-owned, country-led”, while fulfilling the social contract with taxpayers would be valuable.
Meanwhile, G20 nations have underscored the need for enhancing the representation and voice of developing countries in decision making in Multilateral Development Banks (MDBs) like the World Bank and IMF and other international economic and financial institutions.
“In that context, we welcome the creation of a 25th chair at the IMF Executive Board to enhance the voice and representation of Sub-Saharan Africa,” as per the leaders’ declaration during the G20 South Africa Summit held in Johannesburg.
G20 leaders reaffirm the critical role of MDBs in driving poverty reduction, economic growth, and development across client countries.
“We welcome the inaugural Progress Implementation Report on the G20 MDB Roadmap by the Heads of MDBs Group. We further acknowledge the Capital Adequacy Framework’s (CAF) potential to help MDBs more efficiently utilise existing resources, share more risk with the private sector and utilise new instruments to increase lending capacity over the next decade and recognise the need for continued work by the MDBs to implement the G20 Roadmap and CAF reforms,” it said.
G20 reaffirmed its commitment to a strong, quota-based, and adequately resourced International Monetary Fund at the centre of the Global Financial Safety Net.
“We support continued IMF collaboration with Regional Financing Arrangements (RFA). We have advanced the domestic approvals for our consent to the quota increase under the 16th General Review of Quotas, and we look forward to finalising this process with no further delay. We acknowledge the importance of realignment in quota shares to better reflect members’ relative positions in the world economy while protecting the quota shares of the poorest members,” it said.
G20 declaration, however, said building consensus among members on quota and governance reforms will require progress in stages.
Leaders of G20 countries also expressed commitment to the effective implementation of the G20 Roadmap for Enhancing Cross-Border Payments and to take appropriate further actions as necessary to achieve its goals.
It also noted the important role of the Financial Stability Board (FSB) and international standard setting bodies (SSBs) to monitor financial risks and vulnerabilities and to develop sound financial standards and recommendations to maintain financial stability and to enhance the resilience of the global financial system. (PTI)
