The Cannes Action Plan for Growth and Jobs

The world’s major economies pledge to coordinate efforts to restore growth, increase employment and regulate financial markets. The G20 countries agreed on a package of measures to restore global growth at their meeting in Cannes, France, on 3 and 4 November (The Cannes Action Plan for Growth and Jobs)  .

Many measures, including commitments to balance budgets and improve domestic economies, were proposed by the EU. In line with such efforts, the G20 welcomed the eurozone's plan to resolve the debt crisis affecting some members. G20 countries will also increase efforts to reduce long-term unemployment and the effects of globalisation on workers.

Increasing international trade is key to restoring growth and creating jobs. G20 leaders urged more cooperation on reducing trade barriers and avoiding protectionism. They want a stronger role for the World Trade Organisation in settling disputes between countries.

They also called on some countries to stop setting their currency exchange rates at unfairly low levels to increase exports.

Crisis prevention

Financial market reform and investor protection were also high on the agenda. Priorities include better regulation of derivatives trading and reducing the risk of bank failures.

Large institutions with significant roles in the global financial system will be subject to increased supervision. G20 countries propose regulating banking-style activities carried out by investment companies, insurers and others.

As part of the effort to reduce systemic risk to the global economy, G20 countries are prepared to give additional resources to the International Monetary Fund (IMF). New funding programmes would be used to better support countries in economic difficulty.

Poverty reduction

G20 leaders called on governments to follow through on their commitments on development aid, food security and climate change. They agreed that, over time, new sources of funding need to be found to help developing countries.

One such source could be a global financial transaction tax, proposed by the Commission and supported by France, host of the G20 meeting.

Other measures would provide more funds for agricultural research and stabilise food prices, especially for low income countries.

More on the EU positions at the G20

More on the G20

Related Links

• EU priorities at the G20 summit
• Setting global goals at the G8 summit

The Cannes Action Plan for Growth and Jobs

Cross border banking supervision : incentive conflicts in supervisory information sharing between home and host supervisors

The global financial crisis has uncovered a number of weaknesses in the supervision and regulation of cross border banks. One such weakness was the lack of effective cooperation among banking supervisors.

Since then, international bodies, such as the G-20, the Financial Stability Board and the Basel Committee have actively promoted the use of supervisory colleges. The objective of this paper is to explore the obstacles to effective cross border supervisory information sharing. More specifically, a schematic presentation illustrating the misalignments in incentives for information sharing between home and host supervisors under the current supervisory task-sharing anchored in the Basel Concordat is developed.

This paper finds that in the absence of an ex ante agreed upon resolution and burden-sharing mechanism and deteriorating health of the bank, incentive conflicts escalate and supervisory cooperation breaks down. The promotion of good practices for cooperation in supervisory colleges is thus not sufficient to address the existing incentive conflicts.

What is needed is a rigorous analysis and review of the supervisory task-sharing framework, so that the right incentives are secured during all stages of the supervisory process. For this purpose, it is essential that policy makers integrate and harmonize the current debates on crisis management, resolution policy and good supervisory practices for cross border banking supervision

Author: D'Hulster,Katia;Document Date:  2011/11/01. Document Type: Policy Research Working Paper. Report Number: WPS5871.Volume No:  1 of 1

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Tax: G20 countries strengthen international tax co-operation

The Multilateral Convention on Mutual Administrative Assistance in Tax Matters offers a wide range of tools for cross-border tax co-operation. It includes automatic exchange of information, multilateral simultaneous tax examinations and international assistance in the collection of tax due. At the same time, the Convention imposes safeguards to protect the confidentiality of the information exchanged.

“Today we have taken a major step forward to improve global tax cooperation”, said OECD Secretary-General Angel Gurría from the Cannes G20 Summit. “The OECD looks forward to continuing to work with the G20 and other countries to maximize the benefits from this powerful multilateral instrument. Tax co-operation and compliance are of crucial importance for all countries and citizens - and not only in times of a tight fiscal and budgetary environment.”

In 2009, the G20 called for action ‘to make it easier for developing countries to secure the benefits of the new cooperative tax environment, including a multilateral approach for the exchange of information’. In response, the OECD and the Council of Europe developed a Protocol amending the Multilateral Convention to bring it in line with the international standard on exchange of information and to open it up to countries that are neither members of the OECD nor of the Council of Europe.

The instrument reinforces international cooperation to target tax evasion by both individuals and corporations. It complements other initiatives such as that of the Global Forum on Transparency and Exchange of Information for Tax Purposes (see here), supported by the OECD, which already includes 105 countries in an extensive peer review process.

“Now that the G20 countries have led by example, we expect other countries to sign the Convention, said Jeffrey Owens, Director of the OECD’s Centre for Tax Policy and Administration. “As the membership expands, so the effectiveness of the Convention will increase. Over the coming months we will be working with developing countries so that they will rapidly be in a position to sign the Convention,” he added.

All G20 governments have now agreed to a multilateral Convention to tackle tax evasion more effectively.

OECD 03/11/2011.Contact: Jeffrey Owens, director of the OECD’s Centre for Tax Policy and Administration (jeffrey.owens@oecd.org, or in Cannes on +33 6 77 06 67 15).

Further reading

The Multilateral Convention on Mutual Administrative Assistance in Tax Matters (backgrounder)

Also available:

• Fiscalité : les pays du G20 renforcent la coopération fiscale internationale (French)

Tax Havens in Reverse

When the OECD joined the G20 crackdown on tax havens during the economic crisis in 2009, its longstanding work helped to curb this harmful tax practice and implement a global standard of bank transparency. Now the organisation is focusing on another time-honoured malpractice: that of slipping taxable income through fiscal loopholes. Some call this creative accounting, the OECD calls it aggressive tax planning, and because it is hurting government revenue, it is hurting entire economies as well.

In a study of 17 countries, Corporate Loss Utilisation through Aggressive Tax Planning focuses on the losses–real or unreal–that companies claim on tax forms. Due to the financial crisis, global corporate losses have increased significantly, so the numbers at stake are vast, with companies bringing losses forward to future years' profits in order to reduce tax liability. Such loss carry-forwards are as high as 25% of GDP in some countries, the OECD reports. The book addresses both real and artificial losses, as well as the issue of multiple deductions of the same loss, typically by juggling dual-residency status, double-dip leases, or other mismatch arrangements.

Countries have also seen loss-making companies acquired solely to be merged with profit-making companies, and loss-making financial assets artificially allocated to high-tax jurisdictions. This shifting of losses is a case of tax havens in reverse, in which corporations, especially banks, juggle international borders to their advantage. “Losses are of no value in a country with no taxes”, Reuters journalist David Cay Johnston wrote, “but if they can be slipped to a high-tax country where profits are actually earned through economic activity, then the losses are imbued with value.”

How can this be stopped? Early detection via audits, special reporting obligations on losses, mandatory disclosure rules and co-operative compliance programmes can pay off. For instance, the OECD reports that the UK was able to cut off £12 billion in “avoidance opportunities”, thanks to its early disclosure rules.

Among other recommendations, the OECD urges governments to introduce policies restricting multiple use of the same loss and to revise restrictions on the use of certain losses in the context of mergers, acquisitions or group taxation regimes. In short, firm creativity should be directed at business models, and not at the balance sheet.

Click here to see an overview of the report

How to obtain this publication

ISBN 978-92-64-11921-5

©OECD Observer No 286 Q3 2011

G20 High-Level Principles on Financial Consumer Protection

Consumer confidence and trust in a well-functioning market for financial services promotes financial stability, growth, efficiency and innovation over the long term. Traditional regulatory and supervisory frameworks adopted by oversight bodies contribute to the protection of consumers – which is often and increasingly recognised as a major objective of these bodies together with financial stability. However, and while it already exists in several jurisdictions, additional and/or strengthened dedicated and proportionate policy action to enhance financial consumer protection is also considered necessary to address recent and more structural developments.

This renewed policy and regulatory focus on financial consumer protection results inter alia from the increased transfer of opportunities and risks to individuals and households in various segments of financial services, as well as the increased complexity of financial products and rapid technological change, all coming at a time when basic access to financial products and the level of financial literacy remain low in a number of jurisdictions. Rapid financial market development and innovation, unregulated or inadequately regulated and/or supervised financial services providers, and misaligned incentives for financial services providers can increase the risk that consumers face fraud, abuse and misconduct. In particular, low-income and less experienced consumers often face particular challenges in the market place.

In light of these issues, financial consumer protection should be reinforced and integrated with other financial inclusion and financial education policies. This contributes to strengthening financial stability. It is essential to protect consumers’ rights while also recognising the fact that these rights do come with consumer responsibilities. This calls for legal recognition of financial consumer protection, oversight bodies with necessary authority and resources to carry out their mission, fair treatment, proper disclosure, improved financial education, responsible business conduct by financial services providers and authorised agents, objective and adequate advice, protection of assets and data including from fraud and abuse, competitive frameworks, adequate complaints handling and redress mechanisms and policies which address, when relevant, sectoral and international specificities, technological developments and special needs of vulnerable groups. This approach complements and builds upon financial regulation and supervision and financial governance.

In order to ensure effective and proportionate financial consumer protection regimes, it is important that all stakeholders participate in the policy making process.

The principles are addressed to G20 members and other interested economies and are designed to assist the efforts to enhance financial consumer protection. They are voluntary principles, designed to complement, not substitute for, existing international financial principles or guidelines. In particular, they do not address sector specific issues dealt with by the relevant international organisations and the financial standard setters (such as BCBS, IAIS and IOSCO). Different kinds of transactions present different risk profiles. The principles may need to be adapted to specific national and sectoral contexts and should be reviewed periodically by relevant international bodies.2 All G20 members and other interested economies should assess their national frameworks for financial consumer protection in the light of these principles and promote international co-operation to support the strengthening of financial consumer protection in line with, and building upon, the principles.

G20 High-Level Principles on Financial Consumer Protection

October 2011. Organisation for Economic Co-operation and Development,
2 rue André-Pascal, 75775 Paris cedex 16, Francewww.oecd.org