G7 nations’ Finance Ministers and Central Bank Governors meeting held in London from June 4 to 5 2021, chaired by the British finance minister, Rishi Sunak, made an agreement to introduce a global minimum corporate tax rate of at least 15 percent for multinational companies(MNCs).
- The G7 nations include the United States, Japan, Germany, Britain, France, Italy and Canada. The meet was held in Cornwall, southwest England.
- Objective: To overcome the cross-border tax loopholes used by some of the world’s biggest MNCs like Apple, Google and Amazon.
i.The ministers have committed to a minimum global corporation tax of at least 15 percent for multinational companies on a country by country basis which helps governments to recover from the impact of the COVID-19.
ii.They also included measures to ensure taxes were paid in the countries where businesses operate. Ministers also agreed to move towards making companies declare their environmental impact in a more standard way so investors can easily determine whether to fund them.
iii.The following decisions regarding the global corporate tax agreement will be discussed in detail at a meeting of G20 finance ministers in July, 2021 in Venice, Italy.
iv.The G7 commitment to a global minimum tax rate of 15 percent works well for US and most other countries in western Europe, it may face challenges from some low-tax European jurisdictions such as the Netherlands, Ireland and Luxembourg and some in the Caribbean which rely largely on tax rate arbitrage to attract MNCs.
v.As India’s corporate tax rate is higher than the global minimum tax rate, the current agreement will not affect companies doing business in India.
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Starting from April 1, 2021, the Finance Ministry has made it mandatory for Businesses with turnover of more than INR 5 Crore to furnish 6-Digit HSN/SAC (Harmonised System of Nomenclature Code/Service Accounting Code) on invoices issued for supplies of taxable goods and services.
About Corporate tax:
i.Corporation Tax /Corporate Tax is a direct tax levied on the net income/ profit that corporate enterprises make from their businesses.
ii.Corporate tax in india: It is imposed at a specific rate as per the provisions of the Income Tax Act, 1961.The corporate tax rate for foreign companies depends upon the tax agreement between India and the origin country of the concerned company.