The Organization for Economic Cooperation and Development (OECD) stated that 130 countries including G20 members, India & China have joined the G20-OECD Tax Framework Deal for Global Minimum Corporate Tax.
i.The Global Minimum Corporate Tax is set to come into force from 2023 mandates 15% Tax on globally operating companies (such as Google, Facebook). It is applicable for Global companies with global annual revenue of at least 20 billion Euros (USD 24 billion) and a profit margin of over 10%.
- The objective of introducing the tax is to prevent global companies from shifting to low-tax regions to secure extended profits.
- The 15% tax is expected to generate an estimated USD 150 billion additional tax revenue each year.
- It was proposed by US President Joe Biden and was accepted by the G7 countries in June, 2021.
- OECD is coordinating the global campaign for the Tax.
i.In order to implement the rule, a multilateral treaty is due to be drawn up in 2022.
ii.The deal will be finalized by the end of October, 2021 when the G20 leaders will meet in Rome, Italy.
iii.The agreement also provides for taxing part of the profits that global companies make in countries where they do business online but have no physical presence.
Equalisation Levy by India
i.In 2016, India imposed an equalisation levy of 6% on online advertisement services provided by non-residents. It was applicable to Google and other foreign online advertising service providers.
ii.On April 1 2020, Government expanded its scope by imposing a 2% equalisation levy on digital transactions by foreign entities operating in India or having access to the local market.
- During FY 2020-21, revenue under the levy amounted to INR 1,492 crore until January 30, 2021, which is 30% more than the INR 1,136.5 crore collected in FY 2020.
iii.India may have to withdraw the equalization levy, if the Global Minimum Corporate Tax is implemented in 2023.
Recent Related News:
May 11, 2021, The Asian Development Bank (ADB) has launched the ‘Asia Pacific Tax Hub’ to enhance International Tax Cooperation.
About Organization for Economic Cooperation and Development (OECD)
Secretary-General – Mathias Cormann
Headquarters – Paris, France