G20 BACKS PLAN ON TAX AVOIDANCE
Boosting growth a top priority for economies
MOSCOW – Finance chiefs of G20 states, including South Africa, at the weekend sought to narrow differences on how to keep budget deficits in check without harming fragile growth as the world economy emerges from slowdown.
The finance ministers and central bank chiefs of the top 20 advanced and emerging economies sought in their final communique to show unity on the divisive issue of how to promote growth without harming fiscal situations.
The meeting in Moscow in an exhibition centre outside the Kremlin walls aims to set up the G20 heads of state summit in St Petersburg in September, the culmination of Russia’s presidency of the group.
French Finance Minister Pierre Moscovici said negotiators needed to find a “balanced language” on how to square stimulating growth with reducing deficits.
He said that the final communique would not contain a specific numeric target for reducing public debt and deficits, as was the case at the summit in Toronto in 2010.
“The reduction of deficits is a medium-term objective. But at the same time the short-term priority is growth, growth, and growth, ” Moscovici added.
The US made it clear ahead of the meeting that the fight against unemployment should be at the centre of the agenda, with US Treasury Secretary Jacob Lew calling on EU states to do more to improve demand and growth.
However, some states, in particular Germany, have repeatedly argued over the importance of fiscal prudence and not harming budgets for the sake of stimulus.
The meeting comes amid demands for clarity after the US Federal Reserve said it could begin cutting its quantitative easing programme, which injects about R838-billion a month into the economy via bond purchases, later this year and end the programme by mid-2014.
In testimony to Congress, the Federal Reserve chairman Ben Bernanke stressed that the central bank would only move to taper the programme if the economy appeared strong enough to withstand less support.
Some key nations – fearing that if the US slows down or shuts down completely the flow of money could hurt their own struggling economies – called on US policymakers to be as transparent in their communication on the issue as possible.
“The crucial challenge is how the financial markets manage these signals and how they manage them in a way in which emerging markets and their currencies are not negatively affected,” said South African Finance Minister Pravin Gordhan.
The economic fragility appears to have helped unite the G20 in a fight against tax avoidance, technically legal schemes which allow multinationals to pay very low tax by registering abroad, as well as illegal tax evasion.
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