India joins OECD, G20 Inclusive Framework tax deal of global corporate tax

India has joined the Organisation for Economic Co-operation and Development (OECD) and G20 Inclusive Framework tax deal of global corporate tax.

• According to a Finance Ministry, the members OECD and G20 countries adopted a high-level statement containing an outline of a consensus solution to address the tax challenges arising from the digitalisation of the economy.
• The proposed solution consists of two components- reallocation of additional share of profit to the market jurisdictions and minimum tax subject to tax rules. However, the technical details of the proposal will be worked out in the coming months and a consensus agreement is expected by October.
• The Finance Ministry statement released, said the principles underlying the solution vindicates India’s stand for a greater share of profits for the markets. It said, India is in favour of a consensus solution which is simple to implement and simple to comply with.
• At the same time, the solution should result in allocation of meaningful and sustainable revenue to market jurisdictions, particularly for developing and emerging economies.
• Initially, the global corporate tax was proposed by the United States as Global Minimum Tax (GMT). The tax deal was adopted in the OECD and G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS). BEPS refers to tax-avoiding strategies used by big multinational companies that exploit the gaps and mismatches in tax rules across the globe.
• Around 130 countries, representing more than 90 percent of global GDP, adopted the global corporate tax rate of at least 15 percent. The countries also agreed on a fairer distribution of ‘profits and taxing rights’ with respect to multinationals including digital giants such as Amazon and Google. However, Hungary and Ireland were part of a small group of countries that did not agree on the tax rate on multinationals.

Published date : 03 Jul 2021 04:00PM