In a victory for India, the G20 on Sunday endorsed Prime Minister Narendra Modi’s strong pitch for repatriation of black money at its summit here, echoing the Indian Government’s line on the need for transparency and disclosure of tax information. Modi while voicing India’s support for a new global standard on automatic exchange of tax information urged every jurisdiction, especially tax havens, to provide information for tax purposes in accordance with treaty obligations.
The new global standard will be instrumental in getting information relating to unaccounted money hoarded abroad and enable its eventual repatriation, Modi said, utilising the forum of G20, which accounts for 85 per cent of world’s GDP.
Taking concerns of India and other developing countries on board, the G20 vowed to take “strong practical” measures to reduce the global average cost of transferring remittances to five per cent. India, which is world’s largest recipient of remittances with USD 71 billion sent last year, pushed for a reduction in the remittance costs of non-residents at the G20 summit.
Meanwhile, G20 leaders vowed to implement an anti-corruption action plan as part of a drive against the use of shell companies and trusts to engage in tax evasion and money laundering. “We endorse the 2015-16 G20 Anti-Corruption plan that will support growth and resilience,” the leaders said in a communique released at the end of the two-day summit.
The Prime Minister while flagging his concern over cross border tax avoidance and evasion also noted that increased mobility of capital and technology have created new opportunities for avoiding tax and profit sharing. The three-page communique was released at the end of the two-day summit of Group of 20 industrialised and leading emerging economies hosted by Australia.
Welcoming the “significant progress” on the G20/OECD Base Erosion and Profit Shifting (BEPS) Action Plan to modernise international tax rules, it said, “We are committed to finalising this work in 2015, including transparency of tax- payer specific rulings found to constitute harmful tax practices.”
BEPS is a technical term referring to the effect of tax avoidance strategies used by multinational companies on countries’ tax basis. BEPS is known more commonly as “Transfer pricing”. This term is used in a project headed by the OECD that is said to be an attempt by the world’s major economies to try to rewrite the rules on corporate taxation to address the widespread perception that the corporations don’t pay their fair share of taxes.
Briefing newsmen, Railways Minister Suresh Prabhu and External Affairs Ministry spokesperson Syed Akbaruddin said the reference to transparency, which was not there in the draft communique, was incorporated in the final communique after Prime Minister’s strong intervention at today’s plenary session. After Prime Minister Modi’s intervention, several countries, notably Brazil and South Africa wanted a reference to be made to transparency in the final communique, Akbaruddin said.
“After the prime minister’s own and strong intervention (on repatriation of black money), several countries shared his sentiments and wanted the views to be reflected in the final communique,” he said.
“We are taking actions to ensure the fairness of the international tax system and to secure countries’ revenue bases. Profits should be taxed where economic activities deriving the profits are performed and where value is created,” the communique said.
“The G20 has sent a strong message on taxpayer-specific ruling,” Dr Usha Titus, who assisted Prabhu, said. The Railways Minister was Modi’s sherpa at the deliberations.
Prabhu said Indian concerns on “jobless growth” prospects and the need to create more jobs to kickstart the world economy were also reflected in the G20’s final document. “Our actions to increase investment, trade and competition will deliver quality jobs. But we must do more to address unemployment, raise participation and create quality jobs,” the communique said.
Ahead of the summit, Modi felt that focusing on transforming the quality of life of people and not just on issues like the health of the financial markets was necessary for creating employment-generating economic growth.
At today’s news conference, Prabhu said that development issues like creating more jobs was occupying a “key place” at the G20, adding that tackling unemployment was of prime concern for the Indian Government. “Creating more jobs is now coming at the centre of discussions (of G20),” he added.