The G20 Finance worries about trade tensions

Gathered this weekend in Japan, in Fukuoka, the ministers of Finance and governors of central banks of the G20 countries have reached a new stage in the develop

The G20 Finance worries about trade tensions

Gathered this weekend in Japan, in Fukuoka, the ministers of Finance and governors of central banks of the G20 countries have reached a new stage in the development of a higher tax offensive against tech giants, such as Facebook, Google, Microsoft or Amazon. The representatives have agreed in principle to an agreement to better tax the companies in the digital sector.

The options mentioned in the final communiqué of the G20 suggest an approach incorporating the advice of the OECD: a modification of the method of calculation of the taxation of companies, on the one hand, and a harmonization of tax rates between the countries on the other hand, by applying a minimum rate of taxation on companies on a global scale. This would establish barriers to prevent countries like Ireland to attract companies with tax rates on the companies very low. "We will redouble our efforts to reach a consensual solution with a final report by 2020", it is written in the statement, which also welcomed the "recent progress in the resolution of the tax issues which emerge".

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This declaration is a victory for France and the Uk, advocates of increased taxation of Gafam. "We can't explain to the people that it must pay its taxes when some companies don't, because they pass on their profits in an area of low taxation", thus said Bruno Le Maire during a meeting.

The United States, however, have been more reluctant. If he said, "we cannot agree" about the urgent need for reform of the taxation of the giants of the digital, the us Treasury secretary, Steven Mnuchin, expressed concern about a method that would "discriminate" the technology sector of the us. Washington has "serious concerns" on this matter, and would prefer a broader reform, which would not be limited to the digital economy, but rather to all groups which have "distribution" in other countries. "We must therefore now [...] deal with the technical points to make this agreement," said the former executive of the bank Goldman Sachs.

Uncertainties on the growth of the trade

In parallel, the trade issue has led to tensions between the different countries represented at the G20. The United States, who have refused to admit that the commercial conflicts could destabilise global growth, were left "against all others", according to Pierre Moscovici, and obtained the deletion of one sentence of the final communiqué stressing the "urgent need to resolve the trade tensions". For Washington, no question, in effect, to recognize that these tensions have an adverse effect on global growth.

Despite the reluctance for the u.s., the final communiqué indicates that the trade tensions and geopolitical, have "intensified" in recent times, posing an increasing risk to the stability of the world. "We will continue to address these risks, and we will stand ready to take new measures" to deal with any degradation of the economic climate, " write the representatives of the nations.

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For many players, these statements remain, however, inadequate. "The number one priority" to "mitigate the risks" that affect the global economy should be to "overcome the tensions existing business, including the elimination of tariffs and not to impose new," writes the director-general of the international monetary Fund (IMF), Christine Lagarde. "The road ahead remains precarious and subject to several downside risks", is also in custody.

Reflection on the aging of the population

the leaders of The G20 discussed two additional topics. First, new principles have been adopted to ensure that the countries who lend money to finance the construction of infrastructure in emerging countries to do so in a sustainable manner. A way to respond to concerns that some nations, including China, to provide funds to emerging threatening their independence. "We emphasize the importance of maximizing the positive impact of infrastructure to achieve growth and sustainable development, while preserving the sustainability of public finances", report as well the financial managers of the G20.

Finally, and for the first time, the ministers also worked on the ageing population and its effects on the economy. Advanced by Japan, which chaired the meeting of Fukuoka and suffers the full force of this demographic change, it affects "the whole of humanity", even if "the G20 is aging particularly quickly," said its secretary-general, Angel Gurria. However, the aging "exerts a pressure on the public finances", according to the IMF, while affecting the dynamism of the country: the country must therefore take this problem to arm the body to avoid suffering the consequences, were, therefore, considered stakeholders of this working meeting.

Updated Date: 13 June 2019, 00:00

Kathleen Lees


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