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G-20 Commits to Create Millions of Job, Fight Climate Change; Concerns on Black Money
Nov 18, 2014

Leaders of the Group of 20 countries in their Brisbane Sumit agreed to take a variety of measures to add an extra $2 trillion or 2.1 per cent to world economic output and create millions of jobs by 2018.

Despite host Australia pitching hard to keep climate change outside the G20 agenda, US President Barack Obama brought conviction to its inclusion by announcing a $3 billion climate change fund for developing countries. Japan followed suit by committing another $1.5 billion. 

The incremental 2 per cent growth will come mainly from India, besides China. The central issue is employment as India always wanted; growth without jobs is meaningless. India will also significantly benefit from the higher growth as the global market opens up. 

Another key area that India and other developing countries stressed upon was tackling shortfalls in investments and infrastructure, because these are critical to job creation. Accordingly, besides supporting the Global Infrastructure Initiative, the G20 leaders decided to strengthen public investment and create a more favourable climate for private sector investment in infrastructure.

On the inclusion of climate change in the G20 agenda, India too was facing an enormous challenge because of the past emissions. India too would face increasing pressure on cutting emissions, following a deal between the US and China, within developing countries India must pitch for common but differentiated responsibilities.India was satisfied that there is focus now on the development agenda of the Doha round of trade talks. India had taken a firm but disciplined stance on the Bali package saying it cannot be implemented in a piecemeal fashion. Two days ahead of the summit, India and the US reached an understanding that India’s food security concerns would be addressed even as India decided to sign the Trade Facilitation Agreement.

The G20 communique took specific note of this. The communique said, “We welcome the breakthrough between the US and India that will help the full and prompt implementation of the Trade Facilitation Agreement and includes provisions on food security. We commit to implement all elements of the Bali package and to swiftly decide a WTO work programme on the remaining issues of the Doha Development Agenda to bring negotiations back on track,”

India and the other countries in the BRICS group also pushed hard for long-pending governance and share holding reform of the global institutions such as the World Bank and the International Monetary Fund. They said these institutions must reflect the current realities of the structure of the global economy.

The G20 also agreed to include India’s demand for cutting the costs of remittances as a priority. At present, remittances attract at times charges of as much as 10 per cent. India is the single largest recipient of remittances to the tune of $70 billion. The idea is to bring the costs down to 5 per cent from 10 per cent.

On Black Money Issue: Driven by a strong domestic political agenda of getting black money back home, Prime Minister Narendra Modi managed to get the Group of 20 include a certain clause in the final Leaders’ Communique that will make it difficult for tax havens to give complete tax exemption to companies. This, along with the G20’s endorsement of a global Common Reporting Standard for automatic exchange of tax information on a reciprocal basis, are the twin pillars in India’s fight against tax evasion and repatriating unaccounted money. 

At present, there are many rigidities in international tax laws and past tax treaties also do not facilitate easy exchange of information. India has to make specific requests with tax jurisdictions for information, and more often such information is shared with caveats. 

India’s concerns on black money and tax avoidance have been taken on board in G20. This, would give an impetus to India’s move to renegotiate treaties with some countries. On the implication of the clause that now commits the G20 to ensure transparency of taxpayer-specific rulings found to construe harmful tax practices. For instance, Luxembourg had given a series of rulings which effectively did not require certain corporates to pay any tax. The inclusion of this clause will make it difficult for tax havens to do so for specific corporates.

This is part of the Base Erosion and Profit Shifting (BEPS) action plan of the G20/OECD to modernise international tax rules. The G20 final draft said that this plan has made significant progress and we are committed to finalising this work in 2015. The G20 countries are expected to exchange information with each other and other countries by 2017 or end-2018 after completing legislative procedures.

Putin Walked Out: Russian President Vladimir Putin walked out of Brisbane Summit where he faced concerted Western fire over the Ukraine crisis. Putin left before the final communique from the weekend talks was issued, but attended the annual forum's wrap-up lunch. Putin said that the economic blockade of Ukraine's separatist east by Kiev is a big mistake because it cuts off the disputed regions from the rest of the country. Russia would discuss the blockade with Ukraine president Petro Poroshenko.

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