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Friday, 7 November 2014

It’s the economy, stupid — don’t let Brisbane’s extravaganza get sidetracked.......

“RUSSIANS are shits. They always have been shits. They always will be shits. If you understand that, boys, you can understand foreign policy!”
This is what our biology teacher, Norton Hobson, a strongly anti-communist ex-communist, said to us at Melbourne High School in 1960.
Although somewhat of a caricature, Mr Hobson’s pithy statement contains at least an element of truth, which Tony Abbott might keep in mind when he meets President Vladimir Putin at next Saturday’s G20 leaders summit in Brisbane.
Because the G20 is a consensus-based forum, any decision to ban the Russian President is one for the entire G20 membership. It is not a decision Australia can make unilaterally.
So assuming Putin will attend, the Prime Minister must follow up on his intention of having a very robust discussion with him over the murder of 298 people, including 38 who called Australia home, on flight MH17 over eastern Ukraine.
However, we should note that our extremely well-performing Foreign Minister, Julie Bishop, recently had a constructive conversation with Putin in Milan. Bishop made clear to Putin our concerns about Russia’s involvement in Ukraine.
It is important to remember that last year’s G20 summit in St Petersburg was ­hijacked by events in Syria. It is very much to be hoped the Brisbane summit foc­uses on its key economic agenda and isn’t overwhelmed by a concentration on Islamic State terrorism in Iraq and elsewhere.
This year’s G20 is an opportunity for Australia to influence global economic issues of direct relevance to our nation. It is also a platform for Australia to strengthen our relationships with countries of importance to our strategic and trading interests.
As host, Australia must ensure this isn’t merely a high-level talkfest, and in particular that leaders use their combined influence to deliver economic outcomes to benefit the global community.
In fact, Australia intends to structure leaders’ discussion around three key themes:
Promoting stronger economic growth and employment out­­­comes.
Making the global economy more resilient to deal with future shocks.
Strengthening global insti­tu­tions to ensure their continuing relevance to the global economy.
To achieve these aims, we must maintain a tight focus on core economic issues: increasing employment, promoting trade and competition, investing in infrastructure and, perhaps most important, reforming global tax systems. At the finance ministers meeting in February, Australia achieved a G20 first with a ­commitment to implement policies that aim to lift collective gross domestic product by more than 2 per cent above current estimates across the next five years. This equates to an additional $US2 trillion ($2.3 trillion) in economic activity and tens of millions of new jobs.
This will require each G20 member to deliver a comprehensive growth strategy as part of the Brisbane action plan. It should be noted, however, that members’ initiatives are about 90 per cent of the way to achieving that collective ambition, with nearly 1000 measures being put on the table.
It is strongly to be hoped that, at this G20, all leaders of member countries will deeply understand that the international tax system is in urgent need of reform. Tax avoidance, including base erosion and profit shifting, by large multinational enterprises, is becoming more common, sophisticated and aggressive.
Multinationals avoid paying tax through corporate planning strategies that exploit gaps and mismatches in countries’ tax standards. Surely, as a principle, company profits should be paid in the country where they are earned?
The G20 must firm up its intention to tackling base erosion and profit shifting.
This is why the G20 has endorsed a common reporting standard for the automatic exchange of tax information between ­countries. This will improve ­transparency and reduce opportunities for massive tax evasion and avoidance.
Further, enhanced co-operation between tax authorities, including through the exchange of information, will assist tax administrators in building a comprehensive picture of the financial arrangements of their residents. Standardising the type and format of information exchanged, as well as improving timeliness, will increase its effectiveness.
Together with G20 countries, the OECD has developed a new global standard for automatic exchange of information, whereby bulk taxpayer information can be exchanged between tax authorities without first requiring a request to be made.
G20 finance ministers endorsed a new standard in February and agreed to start exchanging tax information automatically by the end of next year — which is when the 2015 G20 leaders summit is scheduled to be held in Turkey.
G20 members account for 85 per cent of the global economy, 75 per cent of trade and two-thirds of the world’s population. The members of the G20 are of key importance to Australia’s economy. They include six of Australia’s top 10 trading partners.
Australia also has invited New Zealand and Singapore as our two guests, which takes the figure to eight out of 10.
More than 75 per cent of Australia’s merchandise exports go to G20 countries, worth about $190 billion.
The G20 has proven itself capable of responding to the direst of economic circumstances, such as the global financial crisis.
Its strength lies in the diversity of its membership, which brings together advanced and emerging economies.

Let’s hope that, at next week’s summit in Brisbane, all G20 members, including Russia, bite the bullet and commit themselves to global economic reforms.