G20 Finance Leaders Advocate for Enhanced Domestic Resource Mobilisation and International Tax Reforms

During the discussions, G20 members highlighted the challenges faced by developing countries in mobilising domestic resources and fully benefiting from international tax reforms.

The first Finance and Central Bank Governors' Meeting of the South African G20 Presidency, held in Cape Town this week, underscored the critical role of domestic resource mobilisation in achieving fiscal sustainability and advancing the Sustainable Development Goals (SDGs). The meeting's Chair's Summary emphasized the importance of increasing government revenue through taxation and other non-debt income sources to strengthen economic resilience and support sustainable development.

Challenges in Domestic Resource Mobilisation

During the discussions, G20 members highlighted the challenges faced by developing countries in mobilising domestic resources and fully benefiting from international tax reforms. Recognizing these difficulties, the meeting urged international and regional organisations to coordinate efforts in strengthening capacity-building frameworks. The Platform for Collaboration on Tax (PCT) was called upon to report on progress in improving the efficiency of technical assistance, in line with the Rio de Janeiro G20 Ministerial Declaration on International Tax Cooperation.

To further these efforts, the International Monetary Fund (IMF), in consultation with other PCT partners, has been tasked with preparing a report on enhancing revenue administration. This follows the IMF's earlier note, Alternate Options for Revenue Mobilisation, which was presented to the Brazilian G20 Presidency.

Enhancing Tax Transparency and Information Sharing

The meeting also emphasized the need for greater international tax transparency to combat tax evasion and avoidance. The Organisation for Economic Co-operation and Development (OECD) was requested to facilitate voluntary information exchanges related to real estate transactions. Additionally, the OECD was encouraged to advance work on simplifying tax rules, promoting tax certainty, and reducing compliance costs while upholding the integrity of existing tax frameworks.

Members acknowledged the necessity of an inclusive, effective, and stable international tax system and encouraged ongoing discussions on a United Nations (UN) Framework Convention on International Tax Cooperation. They stressed the importance of achieving broad consensus while maximizing synergies with existing international efforts to avoid unnecessary duplication.

Commitment to the International Tax Agenda

The meeting reaffirmed the G20's leadership in maintaining momentum on international tax discussions. The South African G20 Presidency invited the OECD/G20 Inclusive Framework (IF) on Base Erosion and Profit Shifting (BEPS) to report on progress by October. The OECD, in collaboration with the Global Forum on Transparency, was also asked to assess advancements in tax transparency initiatives since the G20's initial involvement.

Progress on the Two-Pillar Taxation Solution

The meeting noted progress in implementing the Two-Pillar Solution, designed to address tax challenges arising from the digital economy. Pillar One aims to reallocate some taxing rights to market jurisdictions, while Pillar Two introduces a global minimum tax to prevent tax base erosion.

South Africa has already implemented the global minimum tax through the Global Minimum Tax Act 46 of 2024. The Chair's Summary acknowledged the need to respect national sovereignty while supporting the swift adoption of the Two-Pillar Solution across jurisdictions. To assist developing nations, the South African G20 Presidency called on the OECD/G20 IF on BEPS, in cooperation with international organisations, to provide targeted technical support for country-specific implementation strategies.

Conclusion

The Finance and Central Bank Governors' Meeting reaffirmed the G20's commitment to strengthening domestic revenue mobilisation, fostering international tax cooperation, and ensuring the fair and effective implementation of global tax reforms. As the South African G20 Presidency progresses, further reports and discussions will shape the path toward more equitable and sustainable global taxation policies.