The Finance Ministers and Central Bank Governors of the G20 (FMCBGs) met in Italy on Friday 9 and Saturday 10 July and released a communique following their meeting. In this first in-person meeting since February 2020, the FMCBGs reported excellent discussion, though most points will be discussed further at their next scheduled meeting in October. Main items discussed in this release are:
Corporation Tax/BEPS: The communique notes that the FMCBGs “have achieved a historic agreement on a more stable and fairer international tax architecture”, and endorse the reallocation of profits of multinational enterprises and an effective global minimum tax as set out in the “Statement on a two-pillar solution to address the tax challenges arising from the digitalisation of the economy” released by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) on 1 July. The FMCBGs will be reviewing the OECD/G20’s detailed plan in their next meeting in October 2021.
Climate Change: The communique states that “Tackling climate change and biodiversity loss and promoting environmental protection remain urgent priorities.” The October meeting will also review the Sustainable Finance Working Group (SFWG) Synthesis Report and a multi-year G20 Roadmap on sustainable finance, initially focused on climate.
ESG Reporting. The International Financial Reporting Standards Foundation (IFRS) has been working to develop a baseline global reporting standard to foster global best practice, based on the Financial Stability Board’s (FSB) Task Force on Climate-related Financial Disclosures (TCFD) framework. “We will work to promote implementation of disclosure requirements or guidance, … aimed at developing a baseline global reporting standard.”
Debt Transparency: The FMCBGs put their support behind IMF and World Bank efforts on a proposal to strengthen the quality and consistency of debt data and improve debt disclosure. Further, they call upon all private sector lenders to adhere to the Institute of International Finance (IIF) Voluntary Principles for Debt Transparency.
Capital Adequacy: The FMCBGs agreed to launch an Independent Review of Multilateral Development Bank’s (MDBs) Capital Adequacy Frameworks, aiming to promote the sharing of best practices and maximise developmental impact without prejudice to governance, credit ratings and preferred creditor treatment.
LIBOR: The FMCBGs reviewed the progress report on LIBOR transition from Financial Stability Board (FSB) and “reiterate the importance of an orderly transition away from LIBOR rates to suitably robust alternatives before end-2021.”
Cross border payments: The G20 FMCBGs are committed to “a timely and effective implementation of the G20 Roadmap to enhance cross border payments by relevant authorities.” There will be an FSB report delivered in October and aiming to set quantitative global targets for addressing the challenges of cost, speed, transparency and access.
Digital currencies / “global stablecoins”: The FMCBGs noted the report on central bank digital currencies for cross-border payments, produced by the Committee on Payments and Market Infrastructures, Bank for International Settlements Innovation Hub, IMF and WB. The FMCBGs will discuss this further in October, along with considering the wider implications for the international monetary system.
“We reiterate that no so-called “global stablecoins” should commence operation until all relevant legal, regulatory and oversight requirements are adequately addressed through appropriate design and by adhering to applicable standards.”
AML / CFT: The FMCBGs also confirmed their support for the Financial Action Task Force (FATF) and the nine FATF-style Regional Bodies (FSRBs), and each of the G20 member countries committed to “making additional contributions as needed to strengthen the FSRBs and the Anti-Money Laundering / Countering the Financing of Terrorism (AML/CFT) frameworks of their membership”.
Augusto Berutich, Head of Global Tax at Auxadi, said: “The agreements reached by the G7 and more recently the G20 are the reflection of a prevalent trend. Tax systems are leaning towards an increasingly globality, favouring cross-border competitiveness, and avoiding disagreements between countries. However, economic operators must remain vigilant as there are still uncertainties as to its practical application, and its effects on investment and employment”.
They reaffirmed their commitment to fully implementing and strengthening AML/CFT global standards on beneficial ownership transparency, virtual assets regulation and supervision within their jurisdictions. Many specific issues will wait for more information, which expected to be available for the October meeting.
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