G20 Finance Ministers and Central Bank Governors Meeting

October 14, 2022

306

In News

Recently, the G20 Finance Ministers and Central Bank Governors meeting was held on the sidelines of the annual meetings of the IMF and the World Bank in Washington.

Major Highlights of the meeting

Simplifying International taxation:
- India has demanded that the international tax rules should be simple, administrable, and generate meaningful revenue in developing countries.
- It called for an effective tax reporting regime and information exchange between jurisdictions for crypto assets to combat offshore tax evasion.
Need for a private sector participation:
- It is needed in scaling up sustainable and digital infrastructure investments and mobilising finance at sub-national level for inclusive and quality infrastructure.

What Is an International Tax Rule?

International tax rules apply to income companies earn from their overseas operations and sales.
Tax treaties between countries determine which country collects tax revenue and anti-avoidance rules are put in place to limit gaps companies use to minimize their global tax burden.

Purpose of cross-border tax rules?

When a company earns profits in a foreign jurisdiction it will often send some of those earnings back to its headquarters, which may distribute a portion to shareholders as a dividend.
- Each of these activities could trigger one or more international tax rules.
International tax rules define which countries tax the profits of a multinational business.
Generally, the purpose is to ensure that the income of companies is taxed once rather than multiple times by multiple jurisdictions.

Economic Impacts of International Tax Rules?

This is done to eliminate double taxation through clear tax treaties and limited rules that require foreign earnings to be taxed in headquarter countries.
Many countries have been adopting or strengthening their anti-tax avoidance rules on cross-border income in recent years.
- These policies, like transfer pricing rules, controlled-foreign corporation rules, and thin capitalization rules have been found to decrease tax avoidance behaviour.

Way Forward/ Suggestions

Collective responsibility: Today’s global economy faces a confluence of challenges and it is the collective responsibility of everyone to prevent the risks from aggravating.
Common goal of prosperity: G20 has always come together in the harshest global situations setting aside the differences and working towards a common goal of prosperity for the people.

G20

The G20 is a strategic multilateral platform connecting the world’s major developed and emerging economies.
The G20 holds a strategic role in securing future global economic growth and prosperity.
Together, the G20 members represent more than 80 percent of world GDP, 75 percent of international trade and 60 percent of the world population.
Starting in 1999 as a meeting for the finance minister and central bank governors, the G20 has evolved into a yearly summit involving the Head of State and Government.
- In addition to that, the Sherpa meetings (in charge of carrying out negotiations and building consensus among Leaders), working groups, and special events are also organized throughout the year.
The members of the G20 are: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union. Spain is also invited as a permanent guest.
- Each year, the Presidency invites guest countries, which take full part in the G20 exercise.
- Several international and regional organizations also participate, granting the forum an even broader representation.
The G20 has no permanent secretariat.

Source: AIR