G20 meet highlights COVID-19 repercussions on remittances

The UAE recently participated in the G20 Finance Track’s second Global Partnership for Financial Inclusion (GPFI) meeting, which took place virtually.

The meeting discussed the COVID-19 repercussions on remittances, future developments and possible solutions to existing challenges for cross-border payments and remittances, digital financial solutions to promote resilience and financial literacy, and Micro, Small & Medium Enterprises (MSMEs) financing and digital financial inclusion.

Mariam Al Hajri, General Budget Deputy Manager at Ministry of Finance; along with Thuraya Al Hashemi, Projects Manager at Ministry of Finance, represented the UAE G20 team participating in the meeting. G20 members and invited countries, non-G20 GPFI invited members, representatives of international organisations and the GPFI’s affiliated partners attended the meeting, which was held under the Italian presidency of the G20 this year.

During the meeting, the UAE G20 team reviewed the UAE’s global competitiveness in low-cost remittances which is one of the important goals of the G20 and the 2030 Sustainable Development Goals.

The team also reviewed the country’s second place global ranking on the list of exporters of remittances, noting that what the UAE has been able to achieve in this area is due to advanced digital infrastructure and interconnected payment networks available in the nation’s financial sector.

The UAE also called for greater global collaboration on exploring the use of stablecoins and blockchain networks to enable faster, cheaper and more secure transactions.

The UAE also pointed to the importance of maintaining flexible legislative systems for consumer protection in order to facilitate the provision of new financial channels capable of reaching people outside the financial system in developing countries, as well as accelerating innovation in the field of financial technology. Additionally, the UAE stressed the need to build effective partnerships with the private sector, because of their positive impact on enhancing financial flexibility and raising the level of digital financial inclusion alike.

At the end of the meeting, the attendees reviewed the progress made on the reports that are being prepared by the GPFI this year, with an agreement to continue providing support until the reports are completed. Also, the members agreed to continue to provide support as the reports progress. The final version of the GPFI reports are planned to be delivered before the third and final GPFI meeting of the year on Oct.4 2021. Meanwhile the world’s financial leaders will endorse on July 9-10 a deal setting a global minimum corporate tax and call for technical work to be finished so they can approve the framework for implementation in October, their draft communique showed.

“After many years of discussions and building on the progress made last year, we have achieved a historic agreement on a new, fair and stable international tax architecture,” the draft said.

It made no mention of a specific rate for a global minimum corporate tax nor other key details, which remain to be agreed by nearly 140 countries known as the Inclusive Framework meeting online next week in talks hosted by the Paris-based Organisation for Economic Cooperation and Development.

Details agreed at that meeting will then be sent to finance ministers and central bank governors from the world’s 20 biggest economies (G20) for approval at the July 9-10 meeting in Venice.

“We endorse the core elements of the two pillars on the profit reallocation of multinational enterprises and the global minimum tax as set out in the statement released by the G20/OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS),” the G20 draft said in anticipation of the talks next week. The first “pillar” of the OECD agreement is to ensure that international companies, especially digital giants like Google, Amazon, Facebook, Apple, or Microsoft, pay taxes in countries where they make profits, rather than in low-tax jurisdictions chosen to minimise tax payments.

The second “pillar” is a minimum level of corporate tax globally so that governments do not compete with each other by lowering taxes to attract investment from large multinationals.

G7 finance ministers backed earlier this month a global minimum tax rate of at least 15% and thresholds for divvying up governments’ rights to tax the profits on cross-border commerce, but the G20 draft did not make any reference to that number. “We call on the G20/OECD Inclusive Framework on BEPS to swiftly finalise the remaining technical work with a view to approving the framework for implementation of the two pillars by our next meeting in October,” the draft, seen by Reuters, said.

Intense bilateral discussions are currently underway ahead of the OECD-hosted talks to get countries on the same page in the face of stiff resistance from low-tax countries, which in Europe include Ireland, the Netherlands, Hungary, and Luxembourg.