India is reportedly seeking to amend the 2021 corporate taxation deal in order to secure a higher share of taxes from multinational companies (MNCs) operating in the country. According to sources close to the discussions, New Delhi will propose this amendment at the G20 finance ministers and central bankers meeting in Gujarat later this week.
The 2021 corporate taxation deal was a landmark agreement signed between the G20 nations and the countries of the Organization for Economic Cooperation and Development (OECD). With over 140 countries and jurisdictions representing more than 90% of global GDP as signatories, the agreement aims to revamp the rules on taxing global companies like Apple and Google, which operate in multiple jurisdictions and often book profits in low-tax countries. As per the deal, these companies will be subject to a minimum tax rate of 15%, along with an additional 25% tax on their “excess profits” – annual revenues exceeding $22 billion or 10% of annual growth.
However, India is now seeking significant increases in the tax paid by these companies in the countries where they operate. The exact size of the increase that India is seeking has not been specified in the report by Reuters. One source mentioned that India has made suggestions to ensure it receives its fair share of taxing rights on the excess profits of MNCs.
Apart from this, India also plans to propose a separation of withholding tax from the excess profit tax principle. Withholding tax refers to the tax collected by companies while making payments to vendors and employees, which is then remitted to the tax authorities. Under the current deal, countries offset their share of taxes with the withholding tax they collect. India’s proposal would de-link these two components.
These suggestions have already been made by India to the OECD and will now be discussed at the G20 meeting. The meeting, taking place on Monday and Tuesday, will provide an opportunity for India to present its case and seek support from other countries for its proposed amendments to the 2021 corporate taxation deal.
India’s move to seek a higher share of taxes from MNCs comes as other countries also adopt measures to ensure that global companies pay their fair share of taxes. This initiative aims to address the long-standing issue of tax avoidance by multinational corporations and to create a more level playing field for businesses operating across borders.
The discussions at the G20 meeting will likely be crucial in determining the future direction of global corporate taxation regulations. The outcome will have implications not only for India but also for other countries seeking to make sure that multinational companies contribute their due share to the local economies in which they operate. As the negotiations unfold, it remains to be seen how willing other countries will be to support India’s proposals and what impact any changes to the 2021 corporate taxation deal may have on the global business landscape.
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