G-20 fo­cuses on trade dis­rup­tion and tax­ing tech com­pa­nies

The Charlotte Observer (Sunday) - - Stay Connected - BY ELAINE KURTENBACH As­so­ci­ated Press

How to re­order the global fi­nan­cial sys­tem in an era of trade stand-offs and tech­no­log­i­cal change held the at­ten­tion of fi­nan­cial of­fi­cials from the Group of 20 ma­jor economies on Satur­day.

The cen­tral bank gov­er­nors and other fi­nan­cial reg­u­la­tors meet­ing in this south­ern Ja­panese port city flagged risks from up­sets to the global econ­omy as Bei­jing and Wash­ing­ton clash over trade and tech­nol­ogy.

U.S. Trea­sury Sec­re­tary Steven Mnuchin said “no” when asked if other fi­nan­cial lead­ers at­tend­ing the meet­ings in Fukuoka were rais­ing con­cerns over the im­pact on global mar­kets and trade from Pres­i­dent Don­ald Trump’s cru­sade against huge, chronic U.S. trade deficits, espe­cially with China.

But Mnuchin ac­knowl­edged that growth has been slow­ing in Europe, China and other re­gions.

“I’m hear­ing con­cerns if we con­tinue on this path there could be is­sues. There will be win­ners and losers,” he said.

Trump and mem­bers of his ad­min­is­tra­tion con­tend that the rip­ple ef­fects of the bil­lions of dol­lars in tar­iffs im­posed by Wash­ing­ton on Chi­nese ex­ports over the past year are cre­at­ing new busi­ness op­por­tu­ni­ties for other busi­nesses in the U.S. and other coun­tries.

The G-20 of­fi­cials were ex­pected to ex­press their sup­port for ad­just­ing mon­e­tary pol­icy, for ex­am­ple by mak­ing bor­row­ing cheaper through in­ter­est rate cuts, in a com­mu­nique to be is­sued as meet­ings wrap up on Sun­day.

Their of­fi­cial agenda on Satur­day was focused on longer-term, more tech­ni­cal is­sues such as im­prov­ing stan­dards for cor­po­rate gover­nance, polic­ing cy­ber-cur­ren­cies and re­form­ing tax sys­tems to en­sure they are fair for both tra­di­tional and new, on­line-based in­dus­tries.

En­sur­ing that gov­ern­ments cap­ture a fair share of prof­its from the mas­sive growth of busi­nesses like Google and Ama­zon has grown in im­por­tance over the many years the G-20 fi­nance chiefs have been de­bat­ing the re­forms aimed at pre­vent­ing tax eva­sion and mod­ern­iz­ing poli­cies to match a fi­nan­cial land­scape trans­formed by tech­nol­ogy.

One aim is to pre­vent a “race to the bottom” by coun­tries try­ing to lure com­pa­nies by of­fer­ing un­sus­tain­ably and un­fairly low tax rates as an in­cen­tive.

Mnuchin said he dis­agreed with de­tails of some of the pro­pos­als but not with the need for ac­tion.

“Ev­ery­one, we are now fac­ing a turn­ing point,” Ja­panese Fi­nance Min­is­ter Taro Aso told the group. “This could be the big­gest re­form of the long es­tab­lished in­ter­na­tional frame­work in over 100 years.”

Some Euro­pean mem­bers of the G-20, espe­cially, want to see min­i­mum cor­po­rate tax rates for big multi­na­tion­als. France and Bri­tain have al­ready en­acted stop-gap tax sys­tems for dig­i­tal busi­nesses, but they are not ad­e­quate, said French Fi­nance Min­is­ter Bruno Le Maire.

“For the time be­ing there is no fair tax­a­tion of this new eco­nomic model,” Le Maire said, adding that the hope is to have an agree­ment by the year’s end.

The is­sue is not con­fined to the wealthiest na­tions. In­done­sia, a de­vel­op­ing coun­try of 260 mil­lion with more than 100 mil­lion in­ter­net users, is also strug­gling to keep up.

“The growth has been ex­po­nen­tial but we can­not cap­ture this growth in our GDP as well as in our tax rev­enue,” said In­done­sian Fi­nance Min­is­ter Mulyani In­drawati.

Mo­bile bank­ing, big data, ar­ti­fi­cial in­tel­li­gence and cloud com­put­ing are among many tech­nolo­gies that are ex­pand­ing ac­cess to fi­nan­cial ser­vices for many peo­ple who in the past might not have even used banks.

But such in­no­va­tions raise ques­tions about pro­tect­ing pri­vacy and cy­ber­se­cu­rity, Aso said.

“We need to stay vig­i­lant against risks or chal­lenges,” Aso said.

Ja­pan, the world’s third­largest econ­omy, is host­ing the G-20 for the first time since it was founded in 1999. The venue for the an­nual fi­nan­cial meet­ing, Fukuoka, is a thriv­ing re­gional hub and base for star­tups.

KIM KYUNG-HOON Pool Photo via AP

Fed­eral Re­serve Chair­man Jerome Pow­ell talks with U.S. Trea­sury Sec­re­tary Steven Mnuchin dur­ing the G20 Fi­nance Min­is­ters and Cen­tral Bank Gov­er­nors Meet­ing, Satur­day.

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