Commonwealth Finance Ministers agree that technology could improve debt transparency, but there needs to be closer collaboration to figure out tax implications from the growing digital commerce trade.
That's the word from a recent Ministers meeting, which took the theme of preventing debt crises – the role of creditors and debtors.
The meeting raised issues such as how revenues from collecting tax are important to maintain sustainable debt levels. However, digital trade in services poses new challenges for countries that are not able to calculate when, where and how taxes on digital transactions should be managed and collected.
“The Commonwealth has a distinctive contribution to make by bringing together nations with developed and developing economies to agree on collective approaches and action towards a fair and equitable global system for taxing multinational businesses in a swiftly digitalising economy,” comments Commonwealth Secretary-General Patricia Scotland.
“We need a rule-based system that is inclusive, transparent and efficient so that all countries have a means of collecting revenue and are thereby able to avoid accumulating excessive debt. It goes hand in hand with accelerating the gains to be made by addressing climate change and making progress towards achieving the sustainable development goals.
Ministers at the meeting suggested that the Commonwealth should be involved in discussions with the Organisation for Economic Cooperation and Development (OECD).
The Ministers also warn that international agreement on digital taxation could enable countries to benefit by taxing large technology giants, even if they do not operate within their jurisdictions.
Global debt is also at $19 trillion – a record high – due to global trade and geopolitical tensions. The Ministers agreed that there needs to be a way of making debt management easier, particularly for smaller countries that are vulnerable to ‘debt distress'.
“As seen in the past, disasters can push countries into taking on emergency loans to rebuild and recover. Such debt can easily become unsustainable for most low and middle-income countries, making them vulnerable to debt distress,” the Ministers note.
Ministers also reviewed a suite of Commonwealth initiatives, which included a disaster risk portal to offer streamlined and integrated information on available funds to respond to disasters, and a fin-tech toolkit to help banks leverage innovation in the financial sector.
The Ministers expect to make ‘considerable' progress on the issue of tax and debt by the next Commonwealth Finance Ministers Meeting, which will be chaired by Botswana in Washington DC in 2020.