Little more than a year from the onset of the COVID-19 pandemic, its challenges continue to have widespread effects for our economies and societies. OECD’s latest Economic Outlook from March projects global GDP to bounce back by 5.6% in 2021 - an upward revision of more than one and a half percentage point from our December projection - and 4.0% in 2022. However, the near-term outlook remains uncertain and the recovery largely dependent on 2 factors:the speed and scope of the most ambitious vaccination effort in human history; and a continued monetary and fiscal effort to implement ambitious recovery plans.
Let me focus on the second of these - the recovery – and in particular, the role that the international tax agenda can play in that regard.
First, agreement to modernize the international tax system is within reach in the coming months. There is now a unique opportunity to put an end to the race to the bottom with the adoption of a minimum level of taxation. We are also close to an agreement to address the tax challenges of the digitalization of the economy, with new nexus rules allowing to tax companies even when they are not physically present and new rules to allocate profits so that the rent of the most profitable companies, including digital companies, can be more fairly shared among countries. This reform of the international tax system would reallocate USD 100bn among countries and would increase tax revenues by at least the same amount. We are almost there. We can deliver a historic result and a powerful message by your next meeting in July. It would also add to the 10 trillion Euros deposited in 84 million bank accounts, whose details have been exchanged by virtue of OECD’s Automatic Exchange of Information on Taxes.
Second, we must do better at pricing greenhouse gas emissions. Around 60% of carbon emissions are not priced at all and only around 17% of emissions are priced at EUR 30 per tonne of CO2 or more. Meanwhile, pricing continues to be distorted by fossil fuel subsidies, currently estimated at almost USD 200 billion a year in OECD and G20 countries. As our joint report with the IMF shows, a carbon price is the most cost-effective and efficient way to help curb emissions, and can be introduced in a way that shields vulnerable households and businesses, while yielding significant revenues. Even the most conservative price can yield 1% of GDP in revenue!
I commend you on beginning this much-needed dialogue and sending a strong signal on the G20’s commitment to preserve and protect our planet, which is our single, most important intergenerational duty.
This is my last G20 meeting of Finance Ministers and Central Bank Governors after 15 years at the helm of the OECD. Let me express my deepest admiration for the significant challenges we were able to address and overcome as a group over the last 12 years. From the financial crisis to the COVID-19 crisis, the G20 has shown what multilateral action can deliver for our people and our economies. It was an honour for the OECD and for me to support you, whether on tax issues, on structural reform, or on the latest economic and financial challenges. Please continue to count on the OECD to design, develop and deliver better policies for better lives.