G20 in Moscow approved a restructuring plan for global financial centers
Publication date: 22 July 2013
Financial ministers of the ‚ÄúGroup of Twenty‚ÄĚ met in Moscow this weekend and discussed a set of measures to increase transparency and general predictability of the global financial system. For the first time a plan against tax evasion by transnational companies was approved, so was the regime of automatic exchange of information on taxpayers between all G20 and OECD jurisdictions. Higher priority was put to regulation of national financial markets, accounting for derivatives and redistribution of quotas within the IMF.
The final communique consists of total 38 clauses on various aspects of financial regulation. Participants of the meeting confirmed their ongoing support of the principle of economic stimulation and creation of new job places with new investments (that‚Äôs basically the same principle under which Russia started its G20 presidency in 2013). Attendants also discussed aspects of monetary policy, asking certain financial regulators (including the US Federal Reserve) to act responsibly and to avoid manipulation with currency exchange rates.
At the same time it‚Äôs too early to abandon quantitative easing programs, financial ministers think. In addition, development of internal debt markets may create a needed alternative to banking sources of financing for investments ‚Äď told Russia‚Äôs minister of finance Anton Siluanov.
The main subject for discussion was the recently developed plan by the Organization for Economic Cooperation and Development (OECD) which will be used to fight with illegal withdrawal of assets and profits abroad to offshore jurisdictions.
First of all, a new approach to disclosure of information on taxpayers will be implemented. All OECD and G20 countries will be able to exchange information¬† freely in automatic regime. To make that happen, until the end of the year an addition to the OECD‚Äôs convention on information disclosure will be developed. Yes, there is already a document which has been signed by about 70 counties including Russia, but in fact it today only allows, but not obliges to activate this option. Ratification of the document by countries may commence next year.
The work plan also says that no later than fall 2013 countries are expected to oblige their transnational companies to present full information on distribution of economic operations, income and paid taxes separately and across all counties where they operate. One year later, by fall 2015 it is expected to develop a new format for international treaty which is to replace the current network of more than 4 thousand two-sided double taxation treaties.
Forming a single standard of corporate taxation all over the world was called for by financial ministers of Germany and Great Britain in autumn 2012. It was said that taking the recession into account the growing pressure on countries‚Äô budgets further complicates the problem. For example, according to estimations by Tax Justice Network, annual losses due to tax evasion are about $3.1 trillion, that‚Äôs really huge. The main catalyst of the reform was, of course, the recent publication by the International Consortium of Investigative Journalists (see: http://gaap-ifrs.com/news/133905).
Ministers of G20 also discussed another reform of the derivatives market which is to take over-the-counter (OTC) derivatives to a central counteragent. Its completion is scheduled for 2013. It was earlier proposed to give supervisory functions in that respect to a single financial regulator, most likely the Financial Stability Board in Basel. The FSB‚Äôs final report will be presented at the G20 summit in St.-Petersburg in September 2013. It is there where G20 leaders are expected to approve all plans for the supposed reforms, including another much needed one dealing with redistribution of country quotas within the IMF.
Original source: ‚ÄúKommersant‚ÄĚ