APEC Finance Ministers issue joint statement on base erosion and profit shifting

APEC Finance and Central Bank Deputies' Meeting was an event in the framework of the APEC Finance Ministers' Meeting

BEPS is one of the four major topics at the meting, a great concern for APEC member economies and international organisations, especially the Organisation for Economic Co-operation and Development (OECD) and the World Bank.

BEPS is considered a global concern that needs comprehensive solutions based on multilateral co-operation between countries and conglomerates because in recent years, numerous conglomerates have exploited "loopholes" in the tax policies of the countries serving as their manufacturing base to evade taxes or transfer profits to countries offering lower tariffs.

In the context of the strong growth of conglomerate enterprises in terms of scale and quantity, while unilateral and bilateral co-operations to prevent tax erosion and profit shifting become more and more ineffective, BEPS is heating up.

In Vietnam, the impact of tax evasion on the state budget is evident through the rapacious transfer pricing or cross-border transactions in the e-commerce sector. Transfer pricing is considered a dark side of foreign direct investment (FDI) enterprises.

According to the Vietnam Chamber of Commerce and Industry (VCCI)’s 2016 Vietnam Business Annual Report, over 40 per cent of FDI enterprises in 2007-2015 took losses, but many of them still planned to scale up production.

Along with BEPS, the three remaining topics on the meeting agenda are long-term investment in infrastructure, disaster risk financing and insurance, and financial inclusion.

Notably, regarding long-term investment in infrastructure, the focus was on the mobilisation of long-term capital from the private sector for infrastructure projects. Participants paid special attention to the protection of interests and mitigating risk for private investors in public-private partnership (PPP) projects.

On disaster risk financing and insurance, the meeting focused on financing regimes and insurance for natural disasters and subsequent compensation. Upon the discussion in the workshop on Disaster Risk Financing and Insurance Policies, the APEC Finance and Central Bank Deputies’ Meeting, and the Senior Finance Officials’ Meeting, which was held in February 2017, the finance officials exchanged experiences in dealing with natural disasters on the national and sub-national levels, policies in risk management for public assets in APEC member economies, as well as the activities of the Working Group on Disaster Risk Financing (DRF-WG).

Regarding financial inclusion, the discussion focused on credit market and financial services products in order to serve agricultural and rural development, promote sustainable poverty reduction, as well as reform the agricultural sector. The finance officials have worked with international organisations in sharing research on promoting financial inclusion in the APEC, and implementing cooperation activities in credit information sharing.

Furthermore, in the framework of the APEC Finance Ministers’ Meeting, finance ministers were updated on the implementation of the Cebu Action Plan—a roadmap for a more sustainable financial future for the Asia-Pacific region—which was launched at the 22^nd APEC Finance Ministers’ Meeting in 2015, as well as other relevant issues.

The finance ministers also entered a dialogue with the APEC Business Advisory Council (ABAC) and leaders of major enterprises and business groups in the region, while simultaneously participating in a retreat to discuss several issues of concern.

The 2017 APEC Finance Ministers’ Meeting took place in the ancient city of Hoi An, the central province of Quang Nam, from October 19-21.