Leaders who participated in the just-ended 2016 G20 Summit in Hangzhou, China, have emphasised that their growth must be shored up by well-designed and coordinated policies.
They said they were determined to use all policy tools; monetary, fiscal and structural, individually and collectively, to achieve their goal of strong, sustainable, balanced and inclusive growth.
Monetary policy will continue to support economic activity and ensure price stability, consistent with central banks’ mandates, they noted and added that monetary policy alone could not lead to balanced growth.
Underscoring the essential role of structural reforms, they emphasised that their fiscal strategies were equally important to supporting their common growth objectives and said they were using fiscal policy flexibly and making tax policy and public expenditure more growth-friendly by prioritising high-quality investment, while enhancing resilience and ensuring that debt as a share of Gross Domestic Product (GDP) was on a sustainable path.
In a 48-point communique issued at the end of the G20 Summit, the leaders said they would continue to explore policy options that were tailored to country circumstances and which the G20 countries may undertake as necessary to support growth and respond to potential risks including balance sheet vulnerability.
They reiterated that excess volatility and disorderly movements in exchange rates could have adverse implications for economic and financial stability, adding that their relevant authorities will consult closely on exchange markets.
“We reaffirm our previous exchange rate commitments, including that we will refrain from competitive devaluations and we will not target our exchange rates for competitive purposes. We will carefully calibrate and clearly communicate our macroeconomic and structural policy actions to reduce policy uncertainty, minimise negative spillovers and promote transparency,” they added.
The communique gave an assurance that the leaders were committed to tackling one of the root causes of weak growth by taking innovation as a key element of their efforts to identify new growth engines for individual countries and the world economy, which will also contribute to creating new and better jobs, building a cleaner environment, increasing productivity, addressing global challenges, improving people’s lives and building dynamic, cooperative and inclusive innovation ecosystems.
The communique, therefore, endorsed the G20 Blueprint on Innovative Growth as a new agenda encompassing policies and measures in and across the areas of innovation, the new industrial revolution and the digital economy.
“We commit to pursue pro-innovation strategies and policies, support investment in Science, Technology and Innovation (STI), and support skills training for STI, including support for the entry of more women into these fields and mobility of STI human resources. We support efforts to promote voluntary knowledge diffusion and technology transfer on mutually agreed terms and conditions,” it noted.
Consistent with this approach, the communique said they supported appropriate efforts to promote open science and facilitate appropriate access to publicly funded research results on findable, accessible, interoperable and reusable (FAIR) principles.
In furtherance of these, therefore, the communique emphasised the importance of open trade and investment regimes to facilitate innovation through intellectual property rights (IPR) protection and improving public communication in science and technology and added that it was committed to fostering exchange of knowledge and experience by supporting an online G20 Community of Practice within the existing Innovation Policy Platform and the release of the 2016 G20 Innovation Report.
The communique welcomed the progress made on effective and widespread implementation of the internationally agreed standards on tax transparency and reiterated its call on all relevant countries, including all financial centres and jurisdictions which had not yet done so, to commit without delay to implementing the standard of automatic exchange of information by 2018 at the latest and to sign and ratify the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.
The leaders endorsed the proposals made by the OECD working with G20 members on the objective criteria to identify non-cooperative jurisdictions with respect to tax transparency and asked the OECD to report back to the finance ministers and central bank governors by June 2017 on the progress made by jurisdictions on tax transparency and on how the Global Forum will manage the country review process in response to supplementary review requests of countries.
This is to enable the OECD to prepare a list by the July 2017 G20 Leaders’ Summit of those jurisdictions that have not yet sufficiently progressed towards a satisfactory level of implementation of the agreed international standards on tax transparency.
“Leaders will continue their support for international tax cooperation to achieve a globally fair and modern international tax system and to foster growth, including advancing ongoing cooperation on base erosion and profits shifting (BEPS), exchange of tax information, tax capacity building of developing countries and tax policies to promote growth and tax certainty,” it stated.
It welcomed the establishment of the G20/OECD Inclusive Framework on BEPS and its first meeting in Kyoto, saying the leaders supported a timely, consistent and widespread implementation of the BEPS package and called upon all relevant and interested countries and jurisdictions that had not yet committed to the BEPS package to do so and join the framework on an equal footing.
Defensive measures will be considered against listed jurisdictions, the communique noted, and encouraged countries and international organisations to assist developing economies in building their tax capacity and acknowledge of the establishment of the new Platform for Collaboration on Taxation by the IMF, OECD, UN and WBG.
Financial transparency and effective implementation of the standards on transparency by all, in particular with regard to the beneficial ownership of legal persons and legal arrangements, is vital to protecting the integrity of the international financial system, and to preventing misuse of these entities and arrangements for corruption, tax evasion, terrorist financing and money laundering, the communique noted.
Illicit finance flows
The communique said the leaders supported the principles of the Addis Tax Initiative and said they also recognised the significant negative impact of illicit financial flows on their economies and they would advance the work of the G20 on this theme.
It emphasised the effectiveness of tax policy tools in supply-side structural reform for promoting innovation-driven, inclusive growth, as well as the benefits of tax certainty to promote investment and trade and asked the OECD and the IMF to continue working on the issues of pro-growth tax policies and tax certainty. In this connection, China would make its own contribution by establishing an international tax policy research centre for international tax policy design and research.
“Recognising the detrimental effects of corruption and illicit finance flows on equitable allocation of public resources, sustainable economic growth, the integrity of the global financial system and the rule of law, we will reinforce the G20’s efforts to enhance international cooperation against corruption, while fully respecting international law, human rights and the rule of law as well as the sovereignty of each country.”