What is the significance of the G20? Discuss the recent decisions taken by the group to change the tax codes.
G20 is anï¿½internationalï¿½forum for theï¿½governments andï¿½central bankï¿½governorsï¿½from 20 major economies. It was formed in 1999. The G20 has no permanent staffï¿½of its own and its chairmanship rotates annually between nations divided into regional groupings.
Significance of G20:
- It represents two thirds of the world population
- It holds 85% of the global gross product
- 75% of international trade is represented by G20 members
- It represents 80% of global investments in research and development
- The G-20 is a forum. Its agreements or decisions have no legal impact, but they do influence policies and global cooperation
Recently, G20 finance ministers have agreed to compile common rules to close loopholes used by global tech giants to reduce their corporate taxes. The meeting came out with following decisions:
- There is a need to divide up the rights to tax a company where its goods or services are sold even if it does not have a physical presence in that country
- To decide on a global minimum tax rate to prevent companies from finding a way to book profits in low-tax or offshore havens
- India has also raised the issue of greater participation of the medium and small scale enterprises in developing countries to boost the domestic as well as global trade.
The G20 is capable of delivering practical outcomes if countries use it strategically. Its aim was to review policy decisions to enhance international financial stability.