Finance ministers and central bankers from G20 countries met in Moscow yesterday for a two-day meeting, seeking to intensify the battle against tax evasion and prevent a new global slowdown.
The meeting, preparing for a G20 summit in September that will be the culmination of the Russian presidency of the Group of 20 top advanced and emerging nations, will focus on increasing cooperation in the fight against tax evasion and on regulating finance.
One government source, who declined to be named, said the priority was “to make headway towards greater transparency, towards stronger action against countries with uncooperative legal systems.”
A key objective is to tackle techniques of tax optimization, the complex accounting arrangements used by multinational businesses to minimize their tax bills.
Companies in the spotlight for using these legal, but controversial, methods of booking profits in low-tax countries are US giants Google, Amazon and Starbucks.
So-called tax havens are countries sought out for tax evasion, which is illegal, or avoidance which may be legal, but can be highly controversial.
The issue has become a hot subject, particularly in crisis-hit countries where austerity measures are associated with tax increases and high unemployment.
The role tax havens play was exposed this year by “Offshore Leaks,” a series of revelations about assets lodged in them by high-profile people.
“The techniques of tax evasion and tax havens are the top target for governments and the ministers are going to want to be sure that it is being treated as such” in the run-up to the summit in September, economist Chris Weafer at consultants Macro Advisory told Agence France-Presse.
The tax issue is also a chance for G20 countries to speak with one voice at a time when they are divided over the state of the world economy.
At the beginning of this month, the IMF lowered its forecasts for growth of the economies in China, Brazil, South Africa and Russia.
An exodus of capital from Brazil, Russia, India, China and South Africa (BRICS) prompted by an expected scale-back in US monetary stimulus has raised fears about the health of their economies, which are already losing some of their luster.
This week’s meeting of the 20 leading world economies was supposed to be the stage for the BRICS to discuss and propose joint measures to limit the fallout of a stronger greenback.
However, unlike their wealthier counterparts at the G7, the BRICS are still far from either coordinating monetary policy or jointly intervening in forex markets.
The BRICS surprised many by starting work on a US$100 billion reserve fund and a joint development bank to reshape the global financial architecture long dominated by rich nations. These new institutions will still take some time to materialize.
Russian Finance Minister Anton Siluanov acknowledged in an interview with Reuters that talks for measures to shield the BRICS from global headwinds are moving slowly.
Another BRICS official at the G20 meeting in Moscow put it more bluntly: “There are no discussions inside the BRICS about measures to battle a stronger dollar... We just want to secure what we had agreed on previously.”
BRICS officials have shrugged off criticism saying that it takes time to build solid institutions. Some analysts point to disagreements inside the widely diverse group as the cause for the delay.
The reserves pool is expected to be formally launched at a BRICS summit in Brazil next year and the bank could take years to start lending money.