G20 meet warns of risk to global recovery from COVID-19 variants

The global economic recovery is at risk from the rise of new coronavirus variants and poor access to vaccines in developing countries, finance ministers of the world’s 20 largest economies warned on Saturday.

The G20 gathering in the Italian city of Venice - the ministers’ first face-to-face talks since the start of the pandemic - also endorsed a move to stop multinationals shifting profits to low-tax havens.

That paves the way for G20 leaders to finalise a new global minimum corporate tax rate of 15% at a Rome summit in October, a move that could recoup hundreds of billions of dollars for public treasuries straining under the COVID-19 crisis.


Janet Yellen. File

US Treasury Secretary Janet Yellen said the proposal would end a “self-defeating international tax competition” in which countries have for years lowered their rates to attract companies. She said that had been “a race that nobody has won. What it has done instead is to deprive us of the resources we need to invest in our people, our workforces, our infrastructure.”

A final communique said the global economic outlook had improved since G20 talks in April thanks to the rollout of vaccines and economic support packages, but acknowledged its fragility in the face of variants like the fast-spreading Delta.

“The recovery is characterised by great divergences across and within countries and remains exposed to downside risks, in particular the spread of new variants of the COVID-19 virus and different paces of vaccination,” it read.

“We reaffirm our resolve to use all available policy tools for as long as required to address the adverse consequences of COVID-19,” it added, noting these should be consistent with preserving stability in prices and public finances.

The communique, while stressing support for “equitable global sharing” of vaccines, did not propose concrete measures, merely acknowledging a recommendation for $50 billion in new vaccine financing by the International Monetary Fund, World Bank, World Health organisation and World Trade organisation.

“We all have to improve our vaccination performance everywhere around the world,” French Finance Minister Bruno Le Marie told reporters. “We have very good economic forecasts for the G20 economies, and the single hurdle on the way to a quick, solid economic rebound is the risk of having a new wave.” Differences in vaccination levels between the world’s rich and poor remain vast. WHO Director-General Tedros Adhanom Ghebreyesus has called the divergence as a “moral outrage” that also undermines wider efforts to tame the spread of the virus.

While some of the wealthiest countries have now given over two-thirds of their citizens at least one shot of vaccine, that figure falls to well below 5% for many African nations.

Brandon Locke, of the public health non-profit group The ONE Campaign, decried what he described as the G20’s inaction, calling it “a lose-lose situation for everyone” “Not only will it cost lives in poorer countries, it increases the risk of new variants that will wreak havoc in richer ones,” he said.

TAX HOLDOUTS A Reuters tally of new COVID-19 infections shows them rising in 69 countries, with the daily rate pointing upwards since late-June and now hitting 478,000. https://graphics.reuters.com/world-coronavirus-tracker-and-maps/ Concerns are starting to grow that the spread of the Delta variant could hold back economic recoveries, particularly in those countries where vaccination levels are lower.


Kristalina Georgieva. File

IMF Managing Director Kristalina Georgieva said the world was facing “a worsening two-track recovery” partly driven by the differences in vaccine availability.

The biggest policy initiative at the talks was a well-flagged agreement on the global corporate tax rate, capping eight years of wrangling on the issue.

Setting a global floor of 15% is intended to stop multinationals shopping around for the lowest tax rate. It would also change the way that companies like Amazon and Google are taxed, basing it partly on where they sell products and services, rather than on the location of their headquarters.

US Treasury Secretary Janet Yellen said any countries opposed to it would be encouraged to sign up by October.

“We’ll be trying to do that, but I should emphasise it’s not essential that every country be on board,” she said, adding the deal included mechanisms against the use of tax havens anywhere.

G20 members account for more than 80% of world gross domestic product, 75% of global trade and 60% of the population of the planet, including big-hitters the United States, Japan, Britain, France, Germany and India.

In addition to European Union holdouts Ireland, Estonia and Hungary, other countries that have not signed on include Kenya, Nigeria, Sri Lanka, Barbados and St. Vincent and Grenadines.

Among other sticking points, a fight in the US Congress over President Joe Biden’s planned tax increases on corporations and wealthy Americans could cause problems, as could a separate EU plan for a digital levy on tech companies.

US Treasury officials say the EU plan is not consistent with the wider global deal, even if the digital levy is largely aimed at European firms.