G7 finance ministers meeting in London on 4–5 June
The latest meeting of G7 finance ministers and central bank governors took place in London on 4–5 June, with a focus on “Build Back Better”. This was the first in-person Finance Track meeting under the UK’s G7 presidency.
The leading items on the agenda included international tax policy, climate change and the environment, vaccine supply, and support for low-income countries. The finance ministers and central bank governors published a joint communiqué outlining the event’s main outcomes.
The G7 finance ministers agreed in particular on uniform rules for taxing the digital economy. The aim here is to curb harmful tax competition between tax jurisdictions (often referred to as a “race to the bottom”) and to combat aggressive tax planning by multinational corporations. This means that the G7 countries are explicitly endorsing the “two-pillar approach” to international tax policy reform led by the G20 and the OECD’s Inclusive Framework on BEPS.
In the communiqué, the G7 expressed their commitment to reaching an equitable solution on the allocation of taxing rights, with market countries awarded taxing rights on at least 20% of profits exceeding a 10% margin for the largest and most profitable multinational enterprises (Pillar 1). In addition, the G7 committed to a global minimum effective tax of at least 15% on a country by country basis (Pillar 2).
This consensus at the level of the G7 paves the way for G20 and OECD countries to reach a swift agreement on the two-pillar approach. G20 finance ministers and central bank governors will address these issues at their upcoming meeting in July.
In the area of climate and environment policy, the G7 finance ministers discussed measures to tackle climate change and biodiversity loss. Among other things, the G7 agreed to develop binding standards for sustainability reporting by companies, with further deliberations due to take place in the coming months.
To combat illicit financial flows and environmental crime, the G7 pledged for the first time to ensure transparency regarding the real beneficial owners of companies. This is to be achieved through the introduction of registers. In addition, the G7 called on all countries to fully implement the Financial Action Task Force (FATF) Standards and to take further steps to strengthen these standards.
The G7 Finance Track meeting highlighted the important role that international climate finance plays in supporting efforts by developing countries to adapt to and mitigate climate change. To this end, the G7 reaffirmed the goal of developed countries to collectively mobilise €100 billion in public and private funds every year until 2025, for the purpose of supporting measures in developing countries. In addition, they committed to increasing and improving their climate finance contributions.
The G7 discussed ways to provide effective support to low-income countries. They endorsed various measures such as a general allocation of IMF Special Drawing Rights, increased debt transparency, and the continued implementation of the G20 common framework for debt treatments for the poorest countries.
The G7 underscored the necessity of ensuring equitable, affordable and effective access to Covid-19 vaccines, therapeutics and diagnostics across the world. They also welcomed the increased financial commitments by some G7 members to all pillars of the ACT-Accelerator and declared that they are looking forward to more such commitments to help close the programme’s funding gap.