Finance Chiefs from the Group of 20 major economies agreed Sunday to reform global corporate tax rules on internet titans like Google LLC and Facebook Inc., which have been seen as taking advantage of low-tax jurisdictions.
The G-20 Finance Ministers and central bank governors also said they are ready to take action to address downside risks to the global economy as tensions over trade conflicts, particularly those between the United States and China, have “intensified.”
But in a separate meeting, G-20 trade ministers failed to present a united front against protectionism, casting a shadow over the group’s summit scheduled for June 28-29 in Osaka.
“We welcome the recent progress on addressing the tax challenges arising from digitisation and endorse the ambitious work program,” the finance chiefs said in a joint statement issued after their two-day meeting in the Japanese city of Fukuoka. “We will redouble our efforts for a consensus-based solution with a final report by 2020.”
They endorsed the proposals recently made by the Organisation for Economic Cooperation and Development on the new system under which technology heavyweights, also including Apple Inc. and Amazon.com Inc., would be taxed appropriately where they make huge profits.
But Japanese Finance Minister Taro Aso, who chaired the meeting, admitted that member countries may expose their differences in working out details of the new rules.
“It’s not that simple,” Aso told a press conference after the meeting in reference to the OECD proposal to achieve a basic agreement in January. “It depends on what we describe as perfect. I cannot say how far we could go (in finding out common ground). But anyway we started moving.”
The existing taxation rules are based more on where firms’ permanent offices and factories are located rather than where they make their sales.
On the global economy, they warned, “Growth remains low and risks remain tilted to the downside.” But the statement also said it is projected to pick up moderately in the second half of this year.
“Most importantly, trade and geopolitical tensions have intensified,” the communique said, adding that the G-20 nations are ready to take further action to address the risks.
The G-20 trade ministers also wrapped up their two-day talks Sunday in Tsukuba, near Tokyo. But reflecting the U.S.-China tariff war, they made no pledge to fight protectionism in a joint statement.
Japan instead issued a chair’s statement, signalling the member countries were unable to reach a consensus on key issues. “Many ministers expressed serious concern about the current tensions surrounding trade,” it said.
The two ministerial meetings came at a time when the outlook for the world economy remains uncertain due mainly to the escalating trade friction between the world’s two biggest economies.
International Monetary Fund Managing Director Christine Lagarde said the world economy has been facing the “principal threat” stemming from continuing trade tensions.
“I emphasised that the first priority should be to resolve the current trade tensions, including eliminating existing tariffs and avoiding new ones, while we need to continue to work toward the modernisation of the international trade system,” Lagarde said in a statement issued after the meeting.
U.S. Treasury Secretary Steven Mnuchin held talks with Yi Gang, the governor of the People’s Bank of China, on the sidelines of the Fukuoka meeting. Mnuchin said in a tweet following the meeting that they “had a candid discussion on trade issues.”
The G-20 finance chiefs reconfirmed their commitment to refrain from competitive currency devaluations aimed at gaining an unfair trade advantage.
The meeting came as President Donald Trump has been seeking to reduce U.S. goods trade deficits with its major trading partners, including China, Japan and the European Union.
To address global current account imbalances, the G-20 noted the importance of monitoring all components of the current account, including service trade and income balances.
At the press conference, Aso reiterated Japan’s position that the issue of global imbalances should be resolved through multilateral policy coordination, rather than through bilateral trade deals.
Regarding how to finance infrastructure projects in developing countries, the communique called for efforts by both borrowers and creditors to curb excessive loans, as some nations are struggling to repay loans from China under the country’s “One Belt, One Road” initiative.
They also pledged to step up efforts against money laundering and funding of terrorist groups through the use of virtual assets and beef up regulations on cryptocurrency trading.