Brussels, 22/04/2013 (Agence Europe) - At their meeting in Washington at the end of last week, the G20 finance ministers made an important breakthrough on tackling tax evasion.
G20 finance ministers and central bankers recommended extending the automatic exchange of information system between tax offices in replacement of the current system of information being supplied upon request. The decision was unanimous but accompanied by grumbling from China, wishing to protect Hong Kong.
The OECD will provide tools that can be used to put the measure into practice and develop a multilateral convention on clamping down on tax evasion that takes account of the specific situation facing each country. It will regularly report back on progress.
With this in mind, the G20 Finances calls on all jurisdictions and more specifically 14 countries in particular to rapidly introduce measures to bring their legislation into line with international standards and to sign, or indicate willingness to sign, a multilateral convention on tax issues by September. Here too, the OECD will report back on progress. In respect of fighting money laundering and the financing of terrorism, the world's big moneymen encouraged all countries to take measures to ensure their legislation meets the standards laid down by GAFI in order to identify the real beneficiaries of financial transactions around the world by trust funds and cover organisations.
Urgent need for banking union. The ministers and bankers want G20 nations to make greater efforts to encourage financial stability and growth. They say the foundations of economic and monetary union have to be improved in the eurozone, along with urgent introduction of banking union, reducing tax fragmentation and ensuring continued strengthening of bank balance sheets. The United States is asked to do more to consolidate its budget, while big economies in surplus are asked to consider further measures to encourage domestic demand. All countries are asked to continue with the introduction of ambitious structural reforms and to make their strategies public
Quizzed about the recommended public finance correction trajectory in Europe, Euro Commissioner Olli Rehn said that deficits had fallen by a half in the eurozone since 2011 and are expected to fall from around 6% to less than 3% on average this year. In response to much “advice” in this domain, he said the secret was the fact that the speed of budget consolidation in Europe had started falling last year and would fall by around 0.75% in structural terms in 2013 - half of the amount of the year before - although in the United States, it would be around 1.75%. Last week, a US academic study highlighted mistakes made in research by Reinhart and Rogoff of Harvard establishing a link between excessive debt and lacklustre growth, research that Rehn often refers to in justification of the need to cut debt (see EUROPE 10830).
Basel III. In connection with reform of financial regulations, half of G20 countries presented their draft legislation to introduce the Basel III rules on greater bank capital requirements and the others promised to do so at soon as possible in 2013. At the G20 summit in Saint Petersburg in early September, the IMF's Financial Stability Council will report on progress on restructuring too-big-to-fail banks. The G20 called for a feasibility study on how to combine derivatives data from central registers and share it among supervisory authorities. (MB, FG/transl.fl)