India says ‘consensus agreement’ likely by Oct over global tax deal

New Delhi, Jul 02 (PTI):
A day after joining the OECD-G20 framework for global minimum tax, the Finance Ministry on Friday said some significant issues including share of profit allocation and scope of subject to tax rules are yet to be addressed and a ‘consensus agreement’ is expected by October after working out the technical details of the proposal.
Total 130 countries agreed to a overhaul of global tax norms to ensure that multinationals pay taxes wherever they operate and at a minimum 15 per cent rate. India is in favour of a consensus solution which is simple to implement and simple to comply. At the same time, the solution should result in allocation of meaningful and sustainable revenue to market jurisdictions, particularly for developing and emerging economies, the Ministry said. In a statement, the Finance Ministry said majority of the members of OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (including India) adopted on Thursday 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 — Pillar One which is about reallocation of additional share of profit to the market jurisdictions and Pillar Two consisting of minimum tax and subject to tax rules.
“Some significant issues including share of profit allocation and scope of subject to tax rules, remain open and need to be addressed. Further, the technical details of the proposal will be worked out in the coming months and a consensus agreement is expected by October,” the Ministry said.
The principles underlying the solution vindicates India’s stand for a greater share of profits for the markets, consideration of demand side factors in profit allocation, the need to seriously address the issue of cross border profit shifting and need for subject to tax rule to stop treaty shopping.
“India is in favour of a consensus solution which is simple to implement and simple to comply. At the same time, the solution should result in allocation of meaningful and sustainable revenue to market jurisdictions, particularly for developing and emerging economies.
“India will continue to be constructively engaged for reaching a consensus based ready to implement solution with Pillar one and Pillar two as a package by October and contribute positively for the advancement of the international tax agenda,” it added.
Last month, a group of seven developed (G-7) countries, comprising the US, UK, Germany, France, Canada, Italy and Japan, had reached a landmark deal on taxing multinational companies as per which the minimum global tax rate would be at least 15 per cent.
They also agreed to put in place measures to ensure businesses pay taxes in the countries where they operate, a move aimed at plugging loopholes in cross-border taxation. Following this, the Paris-based Organisation for Economic Cooperation and Development (OECD) hosted talks on cross-border taxation of MNCs in which majority of the countries, except Ireland and Hungary, agreed to sign the deal. The G20 group of developed and emerging economies will discuss this on July 9-10 in Venice, Italy.