Global economic recovery is threatened by the emergence of new coronavirus variants and poor access to vaccines in developing countries, the finance ministers of the world’s 20 largest economies warned on Saturday
The G20 meeting in the Italian city of Venice – the ministers’ first face-to-face meetings since the pandemic began – also advocated a move to prevent multinational companies from shifting their profits to low-tax havens.
This paves the way for G20 leaders to set a new minimum global corporate tax rate of 15% at a summit in Rome in October, a move that could recoup hundreds of billions of dollars for treasuries strained by the COVID-19 crisis .
A final communiqué said the global economic outlook had improved since the G20 talks in April thanks to the introduction of vaccines and economic support packages, but acknowledged its fragility in the face of variants such as the rapidly expanding delta.
“The recovery is characterized by large divergences between and within countries and remains exposed to downside risks, in particular the spread of new variants of the COVID-19 virus and different vaccination speeds,” it said.
“We reaffirm our determination to use all available policy tools for as long as necessary to combat the negative consequences of COVID-19,” she added, noting that these should be compatible with maintaining price stability and public finances.
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While the communique emphasized support for a “fair global exchange” of vaccines, it did not propose any concrete measures, but merely confirmed a recommendation for new vaccine funding of US $ 50 billion from the International Monetary Fund, the World Bank and the World Health Organization and the World Trade Organization.
“We all need to improve our vaccination performance all over the world,” French Finance Minister Bruno Le Marie told reporters. “We have very good economic forecasts for the G20 economies, and the only hurdle on the way to a quick, solid economic recovery is the risk of a new wave.”
The differences in vaccination rates between rich and poor around the world are still enormous. WHO Director-General Tedros Adhanom Ghebreyesus has called the divergence a “moral outrage” that is also undermining broader efforts to contain the spread of the virus.
While some of the wealthiest countries have now given at least one vaccination to over two-thirds of their citizens, that number has dropped to well below 5% for many African nations.
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Brandon Locke of the public health nonprofit The ONE Campaign criticized the G20’s inaction, calling it “a lose-lose situation for all”.
“Not only will it cost lives in poorer countries, it will also increase the risk of new variants wreaking havoc in richer countries,” he said.
A Reuters tally of new COVID-19 infections shows that they are increasing in 69 countries, with the daily rate pointing up since the end of June and now reaching 478,000.
Concern is growing that the spread of the Delta variant could slow economic recovery, especially in countries where vaccination rates are lower.
IMF executive director Kristalina Georgieva said the world is facing “a worsening two-pronged recovery”, partly due to disparities in vaccine availability.
The biggest political initiative in the talks was a strong global corporate tax rate agreement that limited eight years of tussle over the issue.
Setting a global floor of 15% is intended to discourage multinational corporations from looking for the lowest tax rate. It would also change the way companies like Amazon and Google are taxed, in part on where they sell products and services, rather than the location of their headquarters.
US Treasury Secretary Janet Yellen said all countries opposing it would be encouraged to sign up by October.
“We will try to do that, but I should stress that it is not absolutely necessary that every country is on board,” she said, adding that the deal includes mechanisms against the use of tax havens everywhere.
The G20 members account for more than 80% of the world’s gross domestic product, 75% of world trade and 60% of the world’s population, including the big hits USA, Japan, Great Britain, France, Germany and India.
In addition to the EU holdouts Ireland, Estonia and Hungary, Kenya, Nigeria, Sri Lanka, Barbados as well as St. Vincent and the Grenadines have not yet been signed.
Among other sticking points, a dispute in the US Congress over the tax increases planned by President Joe Biden for corporations and wealthy Americans could cause problems, as well as a separate EU plan for a digital tax on technology companies.
U.S. Treasury officials say the EU plan is inconsistent with the broader global deal, even if the digital donation is primarily aimed at European companies.
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