The finance chiefs of the Group of 20 economies agreed Friday to aim for the signing “as soon as possible” of a tax treaty that would target digital giants and multinationals, underscoring the need for a fairer and progressive taxation system with the super-rich also in mind.
Wrapping up two days of talks in Rio de Janeiro, the G20 economies also reiterated their commitment to ensuring stability in the foreign exchange market, on the view that excessive and disorderly fluctuations would negatively impact their financial systems at a time of a strong dollar.
Many countries are currently engaged in finalizing the text of a digital service tax treaty for fairer taxation. The objective is to require companies to pay a fair share of tax in countries where they do not have a physical presence but generate profits by offering services.
Japanese Finance Minister Shunichi Suzuki speaks at a press conference after a meeting of G20 finance ministers and central bank governors wrapped up in Rio de Janeiro on July 26, 2024. (Kyodo)
Brazil, chair of the G20 this year, has placed importance on addressing inequality and proposed taxing the super-rich as part of the efforts to make taxation fairer.
“It is important for all taxpayers, including ultra-high-net-worth individuals, to contribute their fair share in taxes,” the G20 said in its outcome document on international tax cooperation.
“Aggressive tax avoidance or tax evasion of ultra-high-net-worth individuals can undermine the fairness of tax systems, which comes along with a reduced effectiveness of progressive taxation,” it said.
The signing of the treaty has faced hurdles, with the most recent goal of June missed. Critics blame the likes of Apple Inc., Google LLC and other global tech giants for failing to shoulder their fair share of tax.
“We think highly of the joint document on international tax cooperation, the first of its kind for the G20,” Japanese Finance Minister Shunichi Suzuki told a press conference after the meeting.
The G20 took up a range of issues affecting the global economy, including the impact of Russia’s war in Ukraine and geopolitical risks.
The finance ministers and central bank governors took note of the increasing likelihood of a “soft landing” for the global economy, adding that upside and downside risks are balanced.
“Well-calibrated” monetary policy has helped ease inflation, and central banks will adjust their policies in a “data-dependent” manner, they said in a joint communique.
The ministerial talks coincided with a sharp rise of the yen against the dollar, with some market players betting the Bank of Japan will raise interest rates next week, a positive factor for the Japanese currency.
U.S. presidential candidate Donald Trump has recently singled out the yen and Chinese yuan in taking issue with the dollar’s strength. Market expectations that Trump, viewed as pro-business and pro-tax cuts, will return to the White House have sent share prices higher.
During the meeting, Japan expressed its “concern” about excessive volatility in the currency market, according to Masato Kanda, the country’s top currency diplomat.
Aggressive interest rate hikes in the United States have strengthened the dollar against other currencies, which in turn has raised concern among some emerging economies about the depreciation of their own currencies and capital flight.
Despite the release of the outcome documents, the G20, which also includes China and Russia, failed to bridge rifts over certain issues like Russia’s invasion of Ukraine and the conflict in the Middle East.
“Some members and other participants considered that these issues have an impact on the global economy and should be treated in the G20, while others do not believe that the G20 is a forum to discuss these issues,” Brazil said in its chair’s summary.
The gap between Western nations that have condemned Moscow’s invasion of Ukraine and imposed sanctions, and others like Russia and China has prevented the G20 from issuing consensus documents after meetings in recent years.
The G20 includes the Group of Seven — Britain, Canada, France, Germany, Italy, Japan and the United States plus the European Union — as well as Australia, India, Saudi Arabia, South Korea and South Africa among others.
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