Time for Structural Change
EghtesadOnline: The world's central banks are "pretty close" to the limits of their ability to stimulate economies, Angel Gurria, head of the Organization for Economic Cooperation and Development, said on Saturday.
In the absence of "breakthrough, collective" policies, global growth is likely to remain weak, Gurria said in an interview with Reuters ahead of a meeting of leaders of the world's 20 biggest economies, the G20, in the eastern Chinese city of Hangzhou.
"We have left our good central bankers to do all the heavy lifting," said Gurria.
"It has to be like a relay. Continued accommodative monetary policy, and then you get to the second relay like in the four-by-100s and the baton passes.
"Now you need to get it to the finance ministers, to the economy ministers, to the trade ministers, to the technology ministers, the science ministers, the education ministers, the competition ministers. Now is the big time for structural change."
Echoing remarks by China's vice finance minister on Friday, Gurria emphasized that a combination of coordinated monetary, fiscal and structural adjustment policies are now necessary to revive growth worldwide, including in China.
Nonetheless, he was relatively upbeat on the outlook for China's growth, despite a rising debt burden and mixed progress on tackling low efficiency and overcapacity in key state-owned sectors.
Gurria said that China likely could continue growing at around 6.5 to 7% during its current five-year plan period (to 2020) without major distortions in the structure of the economy.
The world economy has suffered eight years of crisis and it is of great importance that China, as rotating president of the Group of 20 major economies, has focused on growth recovery, he said.
The G20, the premier platform for international economic cooperation, has been committed to 2% more growth from 2014 to 2018, a goal laid down at the 2014 summit in Australia, but "we are only halfway there," Gurria told Xinhua in an interview on Friday.
From dozens of possible issues to discuss at the G20 gathering, China has placed growth high on the agenda, noted the OECD chief, describing the effort as a big achievement.
"That's very important because, frankly, this is the greatest challenge," said Gurria, citing high levels of unemployment and growing inequality across the world. "You have to think about what is the real issue."
Multinational Tax Policy
In separate remarks to Reuters, Pascal Saint-Amans, the director of the OECD's Center for Tax Policy and Administration, addressed the thorny issue of multinational corporate tax liability, which the European Commission's recent decision against Apple Inc has brought back into sharp relief.
The European Commission said this week that Apple owed up to €13 billion ($14.50 billion) of back taxes to Ireland based on existing regulations, a decision that both Apple and Ireland, which relies on low taxes to attract investment, have vowed to fight.
Apple employs a hybrid tax structure in Ireland for its overseas profits, Saint-Amans said, which enables it to dramatically reduce its tax burden by avoiding full tax residency in either the US or Ireland. Many other multinationals use similar strategies to reduce their global taxation, reports Financial Tribune.
“You end up having hundreds of billions of profits in the middle of the Atlantic,” said Saint-Amans.
“This type of aggressive tax planning is outrageous and it’s precisely because of this type of planning that we launched BEPS.” BEPS refers to tax “base erosion and profit sharing,” and the OECD has launched an aggressive initiative to crack down on it.
US lawmakers have also raised concerns that the case represents an attempt by Europe to encroach on the potential US tax base.
Nonetheless Saint-Amans, a leading force behind the OECD's push to rationalize international tax policy, said that he did not believe the case was likely to serve as a precedent for tax treatment of future multinational profits.
Those, he said, would likely be regulated under OECD's emerging framework for cracking down on corporate tax evasion, which both the European Union and the US have been a party to.