APEC finance ministers in Vietnam discuss taxes, free trade

Deutsche Presse Agentur
Published: Thursday September 7, 2006

Hanoi- Finance ministers from the 18 members of the Asia- Pacific Economic Cooperation (APEC) group kicked off two days of talks in Vietnam's capital Thursday aimed at protecting their financial systems against future economic crises. Vietnamese Prime Minister Nguyen Tan Dung opened proceedings with a call for APEC members to strengthen their economic and taxation policies to cope with the challenges of free trade.

"We realize that regional economies will be faced with many difficulties and challenges, including global imbalances, volatility of world oil prices, the potential bird-flu pandemic and global climate change," Dung said.

"With the trend of opening markets and financial liberalization, there will be risks to macroeconomic policies and institutions especially for developing economies," Dung said.

Looming over the meeting was the issue of whether and how to restart negotiations on a new round of free trade negotiations through the World Trade Organization (WTO). However the group as a whole made no statement on the issue.

Tharman Shanmugaratnam, Singapore's second minister of finance, said proposals on reviving the so-called Doha Round meant to help developing economies received a mixed response.

"There was a very strong sense among several of us that it remains a key economic priority," Shanmugaratnam told journalists.

The ministers began the day with an informal discussion on the vexed issue of tax competition between countries.

"We were mainly looking at tax systems and tax expenditures and the importance of policy in relation to taxation" Australian Finance Minister Peter Costello told reporters.

Some members of the group are keen to avoid a "race to the bottom" between governments reducing their taxation rates in order to attract international businesses to locate in their countries.

However, others see their low tax rates as a key part of their plans to attract and retain foreign investment.

There were also talks on how to cope with the impact of free trade upon government tax revenues.

Most APEC countries are committed to reducing their import tariffs as part of their commitments to the WTO, and other free trade deals and are looking for new ways to raise taxes - in particular by introducing sales taxes.

"We had a good discussion on our experiences with consumption taxes. Some countries are embarking on this but it's obviously a process which requires extensive domestic consultation," Shanmugaratnam said.

Ministers also considered how to cope with increasing strains on pension systems, including ways to move away from salary-related schemes towards ones more based on the performance of financial markets.

"There was also a useful discussion on reform of social security systems, particularly the need to strengthen defined contribution systems as opposed to heavy reliance on defined benefit systems so as to ensure that social security systems are fully funded," Shanmugaratnam said.

Ministers also held talks with the APEC Business Advisory Council (ABAC), which represents businesses in the region.

One attendee, Ken Waller, a senior adviser with the Australian branch of ABAC, said he was pleased with progress so far.

"It was a very successful meeting. Very important issues were put out," Waller said. "So I think APEC is finding a new good level of discussion by ministers."

The APEC meeting continues Friday with further talks about promoting the efficiency of government finances and reforming countries' financial sectors to attract investment.

© 2006 DPA - Deutsche Presse-Agenteur