Strengthening development is central to the G20’s objective of achieving strong, sustainable and balanced growth and ensuring a more robust and resilient global economy. As G20 host and chair of the Development Working Group, Australia along with other G20 members, is focused on practical, high-impact development outcomes in areas that support the G20’s broader growth agenda, including in infrastructure, domestic resource mobilisation (including tax), and financial inclusion (including remittances).
Australia, with other G20 countries, is focused on boosting developing countries’ participation in, and contribution to, global growth by
- helping to increase financing for infrastructure investment in developing countries and encouraging the right conditions to attract private sector investment
- supporting the participation of developing countries in international tax arrangements so they can reap the benefits for domestic revenues
- assisting, through the Global Partnership for Financial Inclusion, developing countries to expand the use of formal financial services and reducing the cost of transferring remittances into developing countries.
The G20 members are also continuing work on other priority areas outlined in the G20’s 2013 St Petersburg Development Outlook. These are:
- food security, where we are considering what actions the G20 can take following consideration of a Review of Economic Growth and Job Creation in Relation to Food Security and Nutrition
- human resource development, where we are helping developing countries to match education and training results with future job markets.
The G20 is also looking at the post-2015 development agenda and considering how the G20 can best support the UN-led process to define a new development framework to replace the Millennium Development Goals.
Australia is actively consulting with G20 and non-G20 countries, international organisations, civil society, business and other engagement groups on the 2014 development agenda.
For more information on the G20 development agenda in 2014 see the G20 website and watch an interview with Australia’s co-chair of the G20’s Development Working Group.
The G20 tax agenda: supporting development
At their meeting in Cairns on 20–21 September 2014, G20 Finance Ministers committed to [PDF]:
…continue to take practical steps to assist developing countries preserve and grow their revenue bases and stand ready to help those that wish to participate in automatic information exchange.
The actions include:
- the development of toolkits to assist developing economies in implementing the OECD/G20 BEPS action items; and
- the implementation of pilots of the AEOI roadmap to identify efficient and effective methods to implement the new standard for the automatic exchange of information for tax purposes.
These actions reflect the G20’s response to two reports prepared for the G20 Development Working Group, welcomed by Finance Ministers in Cairns:
- Report on the impact of base erosion and profit shifting (BEPS) on low income countries, prepared by the Organisation for Economic Co-operation and Development (OECD)
- Automatic exchange of information (AEOI): a roadmap for developing country participation, prepared by the OECD-hosted Global Forum on Transparency and Exchange of Information for Tax Purposes.
G20 members will also support capacity development efforts in developing countries with a focus on the fundamental building blocks of tax policy and administration, to ensure developing countries can reap the full benefits of international tax reforms and mobilise domestic resources for development.
The two reports are the result of extensive consultations with developing countries. These consultations have highlighted the need to strengthen engagement of developing countries in the G20 international tax agenda. As a result, Finance Ministers have asked the OECD, International Monetary Fund, United Nations and World Bank Group to develop a new structured dialogue process for developing countries to work together and directly input into the G20/OECD BEPS project by the G20 Leaders Summit on 15–16 November 2014.
During the consultations, developing countries also identified other international tax issues as priorities, which the DWG will address as part of its multi-year agenda.
Engaging developing countries in the G20 tax agenda
Effective domestic and international tax systems are critical for ensuring developing countries have sustainable sources of government revenue to finance infrastructure and services, like health and education. While developing countries may face similar challenges to the G20 in tackling international tax avoidance and evasion, their reliance on corporate income tax and their capacity development challenges are often much greater. Multinational enterprises are using inconsistencies in international tax laws to shift their profits out of developing countries and into other jurisdictions where they pay much less tax. This means less revenue for developing countries that could otherwise have been used to promote growth and development.
The G20 is working towards eliminating these practices—often referred to as tax base erosion and profit shifting (BEPS). The central principle guiding this work is that tax should be paid where the related economic activity occurs. Under Australia’s presidency, the G20 is working with the Organisation for Economic Co‑operation and Development (OECD) on actions to counter BEPS. We are also seeking to improve international tax transparency and global information sharing so that all taxpayers—individuals and corporations—pay the taxes they owe.
These are global problems that require global solutions. The G20 is committed to ensuring all countries can participate in, and benefit from, the G20 tax agenda. Developing countries have engaged in the process through a range of mechanisms, including:
- meetings of Global Forums on Tax Treaties (September 2013), Transparency and Exchange of Information for Tax Purposes (October 2013), Transfer Pricing (March 2014), and VAT (April 2014);
- meetings of the international Task Force on Tax and Development (hosted by the OECD) in October 2013 [PDF] and March 2014 [PDF], attended by more than 110 jurisdictions and a number of representatives from civil society and the business community;
- four in-depth regional consultations in Asia [PDF] (Korea), Latin America [PDF] (Colombia), Africa [PDF] (South Africa) and CREDAF Dialogue [PDF] (France) with officials from over 80 developing countries in February and March 2014;
- the G20 International Tax Symposium in May 2014;
- participation in a working group focused on the G20 tax agenda within the Global Forum on Transparency and Exchange of Information for Tax Purposes;
- bilateral consultation with G20 Development Working Group members (for example, Australia and New Zealand (as a G20 guest in 2014) have jointly consulted with Pacific island countries on the G20 tax agenda); and
- ongoing dialogue and consultations with key international organisations (such as the OECD, World Bank Group, International Monetary Fund and UN Committee of Experts on International Cooperation in Tax) and regional tax administration forums.
These consultations have provided valuable input into the G20 tax agenda through both Finance Ministers and the G20 Development Working Group. For example, the Development Working Group asked the OECD to analyse the impact of BEPS on low income countries and identify ways the G20 can help them to overcome those challenges. The terms of reference for this work are available on the OECD website [PDF]. The Development Working Group also asked the Global Forum on Transparency and Exchange of Information for Tax Purposes to develop a roadmap for developing countries on steps they can take to automatically exchange tax information with other countries. See the terms of reference for the roadmap.
Update on Progress – Hobart Development Meetings 5-9 May
The world came to Tasmania in early May, when more than 100 senior G20 officials descended on Hobart to continue important discussions in the lead up to the G20 Leaders Summit in Brisbane in November.
Held from 5-9 May at the Hobart Function and Convention Centre, the meetings encompassed the second Development Working Group (DWG) meeting of the Australian G20 Presidency, a meeting of the Global Partnership for Financial Inclusion and a special forum hosted by the DWG on how the G20 might best contribute to the post-2015 development agenda led by the United Nations.
The meetings focussed on what the G20 can do to improve the lives of the poorest and most vulnerable. G20 officials were busy working on how G20 priorities such as boosting infrastructure investment, combatting tax avoidance and increasing access to financial services can benefit those living in developing countries. While accounting for around 85 per cent of the world's economy, G20 member countries themselves are also home to more than half of the world's poor.
Next Stop Brisbane for the G20's Development Agenda
The G20's Development Working Group (DWG) concluded its final meeting of the year on 5 September in Perth, agreeing on new actions to support growth and resilience.
Strengthening global development is central to the G20's objectives.
DWG co-chair Clare Walsh said Australia had championed a range of practical outcomes for developing countries this year.
"Our work to reduce the cost of transferring remittances is just one practical example of where collective G20 effort can make a big difference to the poorest and most vulnerable. While much work remains, the global average cost of transferring remittances has never been lower."
She said the DWG was assisting developing countries — particularly low income countries — to benefit from and contribute to the broader G20 agenda by:
- Increasing financing for infrastructure investment by encouraging the right conditions to attract private sector investment
- Ensuring that developing countries can reap the benefits of the G20's efforts to improve the international tax system, including in combatting base erosion and profit shifting and increasing the information shared between tax authorities
- Assisting developing countries to expand the use of formal financial services and taking action to reduce the cost of transferring remittances into developing economies, and
- Strengthening the G20's contribution to food security and human resource development in developing countries.
Ms Walsh said the central objective of the G20's development agenda was strengthen the development impact of G20 members' non-aid policies, both domestic and external, particularly in the areas of central policy concern to G20 leaders and finance ministers.
"This year, we have seen real progress in integrating development across the G20 infrastructure, finance, tax and energy workstreams, as well as new efforts to expand development links in the G20's employment, trade and anti-corruption agendas," she said.
She also said there was broad agreement in the DWG that the G20's work to boost growth and jobs was the best way for the G20 to contribute to the post-2015 development agenda, led by the United Nations.
The DWG's work will contribute to preparations for the G20 Leaders Summit, to be held in Brisbane on 15-16 November.
Highlight: Australia and the G20 – Global Partnership for Financial Inclusion
The Global Partnership for Financial Inclusion (GPFI) is the main implementing mechanism of the G20 Financial Inclusion Action Plan, which was endorsed by G20 Leaders at the 2010 G20 Summit in Seoul. The G20 recognises that access to finance for individuals and enterprises is one of the main pillars of the global development agenda of achieving strong, sustainable and balanced growth.
The GPFI functions as an inclusive platform for G20 countries, non-G20 countries and relevant stakeholders for peer learning, knowledge sharing, policy advocacy and coordination.
Spearheading the implementation of this work are the three key Implementing Partners: the Alliance for Financial Inclusion (AFI), the Consultative Group to Assist the Poor (CGAP) and the International Finance Corporation (IFC). The World Bank joined the GPFI as an Implementing Partner in 2012, followed by the OECD in 2013.
Two new implementing partners were joined to the GPFI at the May 5-6 meeting in Hobart, Australia:
During Australia’s G20 presidency the GPFI will update the Financial Inclusion Action Plan to focus on innovation and emerging technologies, remittances and other payment systems, women’s economic empowerment and strengthening engagement with the private sector.
The GPFI will also continue its work program through its subgroups:
Listen to the Australian co-chair of the GPFI talk about the work of this group, why Australia is involved and its priorities for 2014:
Global Partnership for Financial Inclusion report
Perth, 1 September 2014
Access to financial services for the world’s poorest and most vulnerable people could be significantly accelerated according to a new report - The Opportunities of Digitizing Payments [PDF] by the Bill & Melinda Gates Foundation, the Better Than Cash Alliance and the World Bank Development Research Group for the Global Partnership for Financial Inclusion.
The core objective of the G20 is strong, sustainable and balanced growth. Achieving that growth is extremely difficult without access to formal financial services. Without these services, people have to rely on costly or insecure ways to save, borrow or make payments and businesses cannot obtain the credit they need to expand.
One of the major reasons for the lack of financial services is that traditional branch based, cash based models are extremely expensive. The emergence of electronic payments via mobile phones, over the counter payments, and payment cards could are spurring much greater access to digital payments.
“Digitizing payments could be the most important way for governments to advance financial inclusion” said Rebecca Bryant.
While, around 77 per cent of those living under $2 per day do not have an account with a formal financial institution, they receive payments from governments and from family and friends. Making these payments digital provides a foothold in the financial system which when accompanied by trust and knowledge of the system and appropriate products will lead to financial inclusion.
Banking the un-banked: G20 works to bring world's poorest into global economy
Hobart, 5-6 May, 2014
More than half the world's adult population (approx. 2.5 billion people) has no access to bank accounts or loans, and no insurance policy to cash in when crops fail or natural disasters hit. For the poorest and most vulnerable, access to financial services provides the only sustainable path out of poverty. These services allow them to save, set up businesses and help to secure incomes.
In 2010, in the wake of the global food, fuel and finance crisis, G20 Leaders endorsed the G20 Financial Inclusion Action Plan. This was followed by the establishment of the Global Partnership for Financial Inclusion(GPFI), an inclusive platform for G20 countries, non-G20 countries and relevant stakeholders for peer learning, knowledge sharing, policy advocacy and coordination. In 2013, the G20 extended the GPFI's mandate to look at how to reduce the costs of remittances, making it easier and cheaper for migrants to send money home to their families in developing countries.
Meeting in Hobart, the GPFI reviewed work to date and focused on how new technologies (such as mobile banking and other innovations) could help advance progress in many developing countries. Delegates also considered how the GPFI could help lower the cost of money transfers, which can attract fees of more than to 30 percent in low-income countries, and improve the availability of remittance services, including from non-bank remittance providers.
Australia's GPFI co-chair Rebecca Bryant said remittances were an increasingly important financing flow for developing countries, accounting for up to six per cent of their gross domestic product and more than three times the value of aid (official development assistance).
"Remittances are an increasingly large source of financing for millions of recipient families and businesses in developing countries, with the total sent in 2013 equal to more than $400 billion," Ms Bryant said.