India on Thursday backed a plan with the world’s leading economies to force multinational corporations to pay a minimum global corporate tax rate of at least 15 percent and promised to work towards final approval of the deal in October this year.
This historic agreement – announced in Paris under the auspices of the OECD – supported the plan (OECD / G20 Inclusive Framework Tax Deal), which contains both elements of the agreement, of up to 130 countries (out of 139 involved in talks). Forged by the G7 in Cornwall in June. For certain industries and companies, however, there are also some special regulations. Once implemented, global companies will be prevented from migrating to low-tax regions in order to secure longer profits.
Countries that have approved the latest five-sided plan together represent more than 90 percent of global GDP.
The proposed solution – the draft of which was approved by the 130 countries, including India, on Thursday – has two components – pillar one, which is about redistributing an additional share of the profit to the market jurisdictions, and pillar two, which consists of a minimum tax and is subject to tax regulations.
The final agreement is expected to be reached in October when the G20 heads of state and government meet in Rome. Implementation of the deal is scheduled to begin in 2023.
Meanwhile, an official press release states that some key issues, including profit sharing and the scope of tax regulations, remain open and need to be addressed. In addition, the technical details of the proposal will be worked out in the coming months and a consensus agreement is expected by October, she added.
The principles underlying the solution confirm India’s pursuit of a greater share of the profits for the markets, the consideration of demand-side factors in profit allocation, the need to seriously address cross-border profit shifting, and the need to submit to tax regulations to add the “treaty shopping” clearance .
India advocates a consensus solution that is easy to implement and adhere to. At the same time, the solution should lead to the market jurisdictions being allocated meaningful and sustainable income, especially for developing and emerging countries. India will continue to work constructively to implement a consensus-based solution with pillar one and pillar two as a package by October and to make a positive contribution to the further development of the international tax plan, the communication continues.