Minister reports progress at talks on G20 financial cooperation
Paris, 25 September 2014
The Minister of Finance and Public Accounts presented the results of the G20 Finance Ministers and Central Bank Governors’ Meeting in Australia on 20 and 21 September 2014.
The meeting provided an opportunity for significant progress on international tax cooperation and highlighted the need to do more to support growth and investment at global level.
The Australian presidency had put the need to increase growth in the medium term at the heart of the discussions and had reaffirmed the goal of achieving a global GDP in 2018 that is two points higher than it would be without further measures on top of the policies already decided on at the St Petersburg summit at the end of 2013.
France emphasized the need for stronger growth that is more balanced between the different economic regions, which also requires action in the short term. The participants concluded that monetary and fiscal policies must be put to work to that end. In particular, fiscal policy must be able to support growth and employment whilst ensuring sustainability in public finances.
Finally, a bridge is needed between the short and long term, between supply and demand: namely investment, public and private, on which the G20 has launched an ambitious multiannual programme of work, particularly on the funding of infrastructure.
On taxation, the meeting in Cairns enabled broad agreement to be noted on swiftly establishing the standard developed by the Organization for Economic Cooperation and Development (OECD) for automatic information exchange between tax authorities. France was a pioneer, coordinating – with its European partners, the G5 finance ministers (Germany, Spain, Italy and the United Kingdom), who met in Paris on 28 April – a group of 47 states and territories which pledged to implement it from 2017 and will sign, at a meeting in Berlin on 29 October, the first bilateral agreements to make this tool a concrete reality. Thanks to this critical mass, the movement will become irreversible, and its aim is to reach all states and financial centres. Several other countries will follow, with implementation from 2018 onwards. The prospect of these mechanisms soon coming into force is one of the factors explaining the current success of provisions to regularize undeclared assets abroad.
At the Los Cabos summit in June 2012, the French President, together with his counterparts, asked the OECD to propose concrete solutions to curb the phenomenon of “base erosion and profit shifting” that enables large multinational groups to pay little or even no tax, due to a lack of appropriate rules. The work relates in particular to increasing obligations on companies to be transparent on transfer pricing, as well as clearer rules for intangible assets (patents, licences etc.), in order to prevent multinational groups from artificially shifting profits between subsidiaries and from one country to another. The ultimate goal is for each state to be able to recover its rightful share of the tax base and for all companies – small and large, international and otherwise – to contribute equally to taxation, in proportion to their profits and in the places where they really make them. The Cairns meeting concluded with the adoption of seven initial proposals. The G20 pledged to complete its work on these subjects by the end of 2015. The government will continue playing an active role to eliminate harmful tax practices, particularly preferential regimes for patents or “patent boxes”, whose sole ultimate beneficiaries are multinationals, to the detriment of taxpayers in all countries.
The Cairns G20 also addressed financial regulation issues, noting in particular the progress made by the Financial Stability Board in its work to resolve the issue of “too-big-to-fail” banks, which is a priority. The taxpayer must not be made to pay when a bank fails. This work at international level matches what Europe has already begun with the second pillar of banking union, decided in June 2012 on France’s initiative. Moreover, on 18 September the National Assembly adopted a bill transposing the European Single Resolution Mechanism, which institutes an orderly management system for banks in difficulty, preventing the spread of financial crises, and harmonizes, in every member state of the European Union, bank deposit guarantee schemes protecting savers.
Beyond increased banking regulation, France remains mobilized for effective regulation in every financial sector, preventing dangerous practice and risks to financial stability from being passed on to less regulated areas of the system.
Finally, on France and Brazil’s proposal, the G20 focused on instruments to resolve sovereign debt crises in a systematic, cooperative way. This work is essential for more effectively combating “vulture funds”, which seek to make profits by judicially attacking the most fragile countries in crisis, thus making it more difficult for there to be negotiated solutions which reconcile the interest of people of the countries in crisis and that of their public and private creditors.