This is the tax message that world finance leaders will be getting from the UK’s Chancellor.
G20 Finance Ministers and Central Bank Governors are meeting in Japan to discuss the future of the global economy. Our Chancellor Philip Hammond will address the group, focusing on the current problem of multinational companies’ avoidance of paying their fair share of corporation tax around the world.
Who are the G20?
The countries in the G20 are: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Republic of Korea, Republic of South Africa, Russia, Saudi Arabia, Turkey, United Kingdom, United States of America.
These countries are considered to be the most advance global economies and are around 60% of the world’s population. In total, these 19 countries create 75% of worldwide trade and hold 85% of global GDP. This collection of co-operation over international finance started in 1999. Each country takes a turn as President for one year and hosts the G20 summit as part of this responsibility.
What is the G20 Summit?
This meeting was called the ‘Summit on Financial Markets and the World Economy’. But this is now shortened to the G20 Summit. Their purpose is to work together to make the global financial situation more stable.
The G20 Summit 2019 explains how this has changed over time to incorporate other factors: “As globalization progresses and various issues become more intricately intertwined, the recent G20 summits have focused not only on macroeconomy and trade, but also on a wide range of global issues which have an immense impact on the global economy, such as development, climate change and energy, health, counter-terrorism, as well as migration and refugees. The G20 has sought to realize an inclusive and sustainable world through its contributions towards resolving these global issues.”
What is the UK’s Chancellor Hammond speaking about?
Philip Hammond published the details for his domestic Digital Services Tax plans, including the recommendation that an international strategy is really the only answer to the issues of certain types of online businesses being able to legally avoid tax. Leading to the ludicrously low UK corporation tax bills being paid by companies like Google and Amazon.
The Chancellor is using his opportunity to speak at the 2019 G20 Summit to promote discussion and agreement on this issue. He is going to share UK successes with digitisation and highlight how the multinational tax system is not keeping up with its innovation.
In his own words: “Britain’s future outside the EU depends on the strong partnerships we build with our friends and neighbours across the world. In Japan, I will further strengthen our successful economic relationship by showcasing how we’re embracing the new economy and champion our world-class expertise in tackling the challenges posed by the digital revolution. I will also meet with my G20 counterparts to reaffirm the need for global reform of the international corporate tax framework, to ensure it is fit for the future.”
What does an international solution to this issue look like?
The G20 Global Infrastructure Hub issued a report which recognises Britain as a “pioneer of project delivery globally.” On this basis, the Chancellor is starting at the beginning by advocating for a shared set of principles to be agreed by the G20. These then form the basis from which to build up to an “international corporate tax framework for digital businesses.”
As with any objective that has a plethora of positive and negative impacts, agreement at every stage is crucial to its ultimate success. It is only by working together to meet new challenges that the world’s financial leaders can achieve the stability we all need to be economically successful.