New Covid outbreaks a high danger to financial restoration, OECD chief says

Covid-19 vaccinations without prior registration being done at Sector 30 district hospital on June 22, 2021 in Noida, India.

Sunil Ghosh | Hindustan Times | Getty Images

New outbreaks of Covid-19 remain one of the top risks to a global economic recovery, the OECD’s secretary-general has warned, calling for developed nations to support less-developed nations with their vaccination programs.

“We must do what we can to get as many people as we can, all around the world, vaccinated. There is a particular responsibility for developed economies and it’s not just a matter of charity or benevolence, it’s actually a matter of self interest both in terms of making sure we keep our populations safe … and also to ensure the economic recovery can be sustained,” Mathias Cormann, secretary-general of the OECD, said Thursday.

“New outbreaks are still one of the biggest downside risks in terms of the sustained economic recovery moving forward,” he told CNBC’s Annette Weisbach.

“There is a race on between getting as many people vaccinated all around the world including and in particular in developing economies and the risk of new variants appearing, and variants that may be resistant to the vaccines currently available,” he noted.

Read more: Covid-19 has destroyed 22 million jobs in advanced countries, says OECD

Cormann is not alone in worrying that the ongoing spread of Covid-19, particularly the latest highly transmissible delta variant among younger and unvaccinated people, could derail an economic recovery.

Bruno Le Maire, France’s finance minister, told CNBC on Tuesday that “the single thing that might jeopardize the economic recovery in France is a new wave of the pandemic.”

On Wednesday, the World Health Organization reiterated its call for wealthier nations to help poorer countries by sharing Covid vaccines, particularly for health and care workers, and the elderly.

Global minimum tax rate

The coronavirus pandemic might be the most urgent issue in terms of global public health but governments have been turning to other pressing matters in the meantime, including international tax reform.

In June, finance ministers of the most advanced economies, known as the Group of Seven, backed a U.S. proposal calling for corporations around the world to pay at least a 15% tax on earnings and the agreement has now garnered support from many more countries.

Last Thursday, U.S. Treasury Secretary Janet Yellen announced that at least 130 nations had agreed to a global minimum tax on corporations, part of a broader agreement to overhaul international tax rules.

Cormann said the agreement was much-needed, noting that “131 countries have reached an agreement on an internationally consistent way forward when it comes to fair taxation. Globalization and the digitalization of our economies created distortions in efficiencies and serious inequities in our tax system and businesses weren’t paying their fair share of tax everywhere where they should.”

“We now have an agreement where the winners of globalization including and in particular the major multinational digital companies do pay their fair share of tax, or would pay their fair share of tax once (the deal is) implemented in the markets in which they generate their profits.”

He noted that all the 131 countries have agreed that the minimum global corporate tax rate should be 15%, as well as those in the Group of 20 industrialized nations. “So that already sets a floor on the level of tax competition globally.”

Some low corporate tax jurisdictions, like Ireland and Hungary, have misgivings over the agreement but Cormann said they were engaged in the negotiation process: “Some countries obviously come at this from a different starting position,” he noted, “but 131 out of 139 counties (members of the G20/OECD Inclusive Framework who are collaborating to reform tax rules) are on board and that’s a significant milestone.”

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