India agrees with the global consensus framework deal to tax multinational companies. On Friday, the Indian government revealed that the country has joined the United States-backed effort.
By far, officials from 130 countries have agreed upon the broad outlines for an overhaul of rules for taxing international companies. Accordingly, G20 nations OECD members are also included among the 130 countries.
In relation to the deal to tax multinational companies, the Indian government said through a statement that “The principles underlying the solution vindicate India’s stand,” Reuters quotes.
Why tax multinational firms?
Applying tax to multinational firms comes with a handful of advantages. Among them is a greater share of profits for the markets and consideration of demand-side factors in profit allocation. Furthermore, implementing tax rules could prevent or even top treaty shopping.
Though, profit-sharing and the scope of tax rules would remain as issues that need to be resolved.
Upon this, US Treasury Secretary Janet Yellen urged Indian Finance Minister Nirmala Sitharaman to discuss on “robust global minimum tax”.
Accordingly, the administration of US President Joe Biden is pushing a minimum tax rate of minimum 15%.
The Organisation for Economic Cooperation and Development (OECD) is looking to finalize the implementation and remaining issues by October. The organisation further aims to implement the deal in 2023, Reuters notes.
Yellen elaborated that global consensus following the agreement could advance the world closer to end a “race to the bottom” on taxation. This would also open the chance for critical investments in infrastructure as well as pandemic relief.
India itself views the consensus as a solution that is “simple to implement and simple to comply with,” the government said.
“The solution should result in allocation of meaningful and sustainable revenue to market jurisdictions, particularly for developing and emerging economies,” it continued.
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