Special Committee on Financial Issues

The financial system is the engine that powers not only nations and their governments’ functioning, but also the universe of private corporations and enterprises that are the units of value-creating economic activity, and that which sustains families, and local communities. How well are our financial systems serving our purpose? Are the various financial instruments designed to solve problems and overcome market failures creating the right outcomes for society at large and for its more vulnerable members? Are banking and credit systems serving their purpose, or are they destroying value? Are they reducing inequality or perpetuating it in new ways?

Across the world, domestic and international banking systems and multilateral financial institutions continue to evolve a repertoire of tools to support the poor and the more vulnerable, be they economically vulnerable people, communities, or states. The advent of new forms of digital currencies, and internet-driven and tech-driven business models in finance hold great promise and can contribute to this repertoire. However, the Covid pandemic and the unprecedented climate crisis has brought to fore many issues, aggravating existing ones, and resurfacing others in newer or stronger ways. Many developing nations find themselves having to deal with multiple crises with only limited fiscal resources at their disposal. These countries’ relatively higher reliance on corporate income tax makes them more susceptible to the harms of base erosion and profit shifting, further limiting their fiscal capacity.

The Special Committee of the C20 on Financial Issues believes that recovery from the multidimensional crises experienced by many nations will require financing that can solve the core issues meaningfully. This will require fundamental change in the global tax regime and the availability of sustainable finance. The C20 must consider select issues from these overarching themes and put forth recommendations for solutions from the perspective of civil society. Apart from addressing issues like offshore tax evasion, imposition of digital services tax and the proposed UN Tax Convention, C20 also calls for urgent action on global debt architecture reform, including creating mechanisms for clear, more timely and orderly debt restructuring. Financial institutions must be committed to the principle of sustainability by mandating the establishment of green sustainable taxonomy. Major action is needed to improve confidence in the Common Framework for debt treatment and a road map devised for helping the growing number of countries facing critical debt vulnerabilities.