The Group of Seven (G7) Finance Ministers and Central Bank Governors met on June 4-5 in London to undertake renewed efforts to address global challenges, including international tax reform, climate change, debt vulnerability and the ongoing COVID-19 pandemic. The talks were also attended by the heads of the International Monetary Fund (IMF), World Bank, Organisation for Economic Cooperation and Development (OECD), and the Eurogroup.
Here are some of the major talking points from the meeting:
Joint Statement
Following the meeting, the countries released a joint statement on taking “concrete actions to address today’s historic challenges” as well as making urgent efforts “towards deeper multilateral economic cooperation.”
In light of the ongoing COVID-19 pandemic, the statement said that the countries expressed their hope to “work together to ensure a strong, sustainable, balanced and inclusive global recovery that builds back better and greener from the Covid-19 pandemic, recognising the disproportionate impact of the pandemic on certain groups including women, youth and vulnerable populations.” The statement further affirmed the commitment of G7 members to “sustain policy support as long as necessary and invest to promote growth, create high-quality jobs and address climate change and inequalities.”
“The Covid-19 pandemic can only be overcome when it is brought under control everywhere,” the statement read. In order to achieve this, the G7 Finance Ministers said that there should be “equitable, safe, effective and affordable access to Covid-19 vaccines, therapeutics and diagnostics across the world.”
In this regard, the statement noted that the G7 has already “provided significant support, including to all pillars of the ACT-Accelerator,” which seeks to accelerate development, production, and equitable access to COVID-19 tests, treatments, and vaccines. The ministers also welcomed the “increased financial commitments” made by some G7 members and said that they were looking for additional commitments to help “close the funding gap.”
In addition, the countries appreciated the World Bank’s efforts in fighting the pandemic but urged it “to step up the use of their considerable convening and financial firepower to address financial and operational challenges to more timely vaccine access by developing countries, including through COVAX.” It further called on the IMF to “explore adapting existing facilities to support vaccine financing” and encouraged the private sector, including the pharmaceutical industry, to “step up their contributions to fighting the current pandemic.”
During the meeting, the ministers also discussed the issue of global tax challenges arising from globalisation and the digitisation of the economy. To this end, the ministers reached a landmark deal to additionally tax multinational companies, such as Amazon and Google, and further undertook measures to prevent these companies from shifting their profits to offshore low-tax havens.
“We commit to reaching an equitable solution on the allocation of taxing rights, with market countries awarded taxing rights on at least 20% of profit exceeding a 10% margin for the largest and most profitable multinational enterprises,” the statement said. It also added that the ministers would “provide for appropriate coordination between the application of the new international tax rules and the removal of all Digital Services Taxes, and other relevant similar measures, on all companies.” They also committed to a “global minimum tax of at least 15% on a country-by-country basis.”
They further noted that while innovation in the digitalisation of money is essential, it also raised several “public policy and regulatory issues.” In this respect, the statement said that the “G7 Central Banks have been exploring the opportunities, challenges as well as the monetary and financial stability implications of Central Bank Digital Currencies (CBDCs).” It also added that the G7 aimed to ensure that CBDC’s are “grounded in long-standing public sector commitments to transparency, the rule of law and sound economic governance [and] operate within appropriate privacy frameworks and minimise spillovers.”
The other major issues discussed during the meeting were that of climate change and support to low-income and vulnerable countries. The ministers pledged to “a multi-year effort to deliver the significant structural change needed to meet our net-zero commitments and environment objectives in a way that is positive for jobs, growth, competitiveness and fairness” and added that they would seek to embed climate change initiatives into “economic and financial decision making.”
The statement outlined that the G7 was looking forward to the “establishment of the Taskforce on Nature-related Financial Disclosures and its recommendations.” The task force is meant to make climate disclosures mandatory by companies in the respective G7 economies. The ministers also asserted that climate finance was “critical for supporting developing countries’ climate change adaptation and mitigation efforts” and, to this end, committed to “increase and improve our climate finance contributions through to 2025, including increasing adaptation finance and finance for nature-based solutions.”
Regarding the issue of support to vulnerable countries, the statement said that the ministers were committed to “supporting poorest and most vulnerable countries as they address health and economic challenges associated with Covid-19” and supported “the new general allocation of Special Drawing Rights (SDRs) of US$650 billion to help meet the long-term global need for reserve assets.” To address the issue of debt vulnerability, the ministers acknowledged that it was important to unlock “sustainable and inclusive growth in developing countries [and] implement the G20 and Paris Club Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative.”
United States
US’ Treasury Secretary Janet Yellen called the commitment towards a global minimum tax rate of 15% as a “significant [and] unprecedented” achievement. She also said that a global minimum tax “would end the race-to-the-bottom in corporate taxation, and ensure fairness for the middle class and working people in the U.S. and around the world.”
United Kingdom
“These seismic tax reforms are something the UK has been pushing for and a huge prize for the British taxpayer - creating a fairer tax system fit for the 21st century,” British Chancellor of the Exchequer Rishi Sunak said. “This is a truly historic agreement and I’m proud the G7 has shown collective leadership at this crucial time in our global economic recovery.”
Canada
Canadian Deputy Prime Minister and Finance Minister Chrystia Freeland said that with the agreement on a minimum tax rate “it is possible to end the race to the bottom on corporate taxation. Multinationals need to pay their fair share of taxes and the G7 has outlined a path to make this possible.”
Other members of the G7 include France, Germany, Italy, and Japan.
SUMMARY: G7 Finance Ministers’ Meeting
The Group of Seven (G7) Finance Ministers met on June 4-5 in London to address key issues like international tax reform, climate change, debt vulnerability, and the COVID-19 pandemic.
June 7, 2021
SOURCE: REUTERS