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G20 finance chiefs back tax deal

Finance leaders from the G20 major economies endorsed a global deal to revamp corporate taxation. They pledged to sustain fiscal support for their economies. The G20 finance ministers and central bank governors also said in a communique after a meeting in Washington that the International Monetary Fund should establish a new trust fund to channel a $650 billion issuance of IMF monetary reserves to a broader range of vulnerable countries.

The finance leaders gave a statement that economic recovery remains highly divergent across and within countries. This is due to the unfulfilled vaccinations and the delta variant of Covid. The G20 finance leaders stated that they will continue to sustain the recovery, avoiding any premature withdrawal of support measures. This is while preserving financial stability and long-term fiscal sustainability, and also safeguarding against downside risks and negative spillovers.

Given rising inflation pressures driven by supply chain bottlenecks and shortages as economies struggle to normalize. The central banks are monitoring current price dynamics closely. The G20 communique said that they will act as needed to meet their mandates, such as the price stability, while looking through inflation pressures where they are transitory and remaining committed to clear communication of policy stances. Bank of Italy Governor Ignazio Visco reported that G20 finance leaders still view elevated inflation in many advanced countries.

Visco stated that these may take months before fading away. Hence, they have to be prepared and communicating very well. And this is why they are discussing, debating it in the central bank community and in the ECB. The G20 finance leaders also pledged to work to address shortages of tools to fight the pandemic. Such as the vaccines, therapeutics and diagnostics. The G20 finance leaders are meeting in Washington on the sidelines of the IMF and World Bank annual meetings.

The G20 leaders endorsed the OECD tax agreement. They also called for swift development of so-called “model rules” to guide countries’ implementation of the deal. This can only ensure that the new rules will come into effect at a global level in 2023. The G20 also agreed to support an IMF proposal to create a new “Resilience and Sustainability Trust”. The financial leaders said that the new RST should preserve the reserve asset characteristics of the SDRs channeled through the Trust. They added that they call for additional IMF members to consider signing voluntary SDR trading arrangements to enhance market capacity.

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