Global digital tax efforts get China boost

Finance minister urges G20 nations to desist from any unilateral measures

China will support the efforts made by the G20 members to forge an international deal on digital taxation by the middle of this year and expects it to help the digital economy develop in an open and fair manner, a top government official said.

Finance Minister Liu Kun said “unilateral measures” should be avoided while dealing with the tax digitization challenges. Unilateral actions like levying taxes on large technology companies may lead to tax competition and discriminatory treatment in various countries, said experts.

Liu shared his views with G20 finance ministers and central bank governors during an online meeting on Friday.

The “safe harbor” clause insisted by the United States government had been a stumbling block in the multilateral digital tax discussions, as it would have forced technology giants to abide by any agreement on levying taxes on their sales, experts said.

At the G20 virtual meeting, US Treasury Secretary Janet Yellen said her country was dropping the safe harbor proposal, a move that is expected to spur the longstalled multilateral negotiations at the OECD.

Italian Finance Minister Daniele Franco, who co-chaired the meeting, told newsmen after the meeting that the G20 expects to find a digital tax solution by the middle of this year.

Liu urged his G20 counterparts to promote a green development pattern, and urged member countries to adopt common standards but different measures to deal with the climate change challenges.

Participants at the G20 meeting also agreed to reestablish the G20 Sustainable Finance Study Group, recognize the need to assess climate-related financial risks, strengthen disclosure of climaterelated information and support the transition toward greener activities.

Yi Gang, governor of the People’s Bank of China, the central bank, said Chinese monetary authorities are willing to work with G20 members to promote green transition through a reestablished group, co-chaired by the PBOC.

Although the global economy is recovering, the recovery is uneven and filled with several uncertainties, said the finance minister. China will strengthen the coordination of macroeconomic policy measures to prevent the COVID-19 pandemic and boost economic growth.

“We should avoid a too-early withdrawal of supportive measures,” he said. “This year, China will continue to adopt a proactive fiscal policy and prudent monetary policy, and maintain a certain intensity of the measures to sustain economic recovery.”

Experts expect the lower fiscal deficit ratio set by the Chinese government for this year is to be announced during the upcoming annual gatherings of lawmakers and policy advisers in Beijing. Local government bond issuances are expected to decline this year on a yearly basis to ensure debt sustainability.

As far as monetary policy is concerned, recent signals have indicated the shift to a normalized stance, given that the economy is on the recovery path.

Zhang Zhiwei, chief economist of Pinpoint Asset Management, said signals are showing a tightening monetary policy stance, which is appropriate given the economic recovery.

And policymakers’ concerns about property bubble will also call for tighter monetary policy this year, meaning a normalization of the policy, Zhang added.

We should avoid a too-early withdrawal of supportive measures ... This year, China will continue to adopt a proactive fiscal policy and prudent monetary policy, and maintain a certain intensity of the measures to sustain economic recovery.” Liu Kun, finance minister of China