India agrees to adopt integrated taxation system with OECD and G20
The Organization for Economic Cooperation and Development (OECD-Organization for Economic Cooperation and Development)/G-20’s majority members (including India) adopted an important declaration yesterday. All the members agreed that the tax challenges due to digitization of the economy should be addressed. It is noteworthy that MNCs/industries divert their profits from high taxing countries and transfer them to low taxing countries. In this way the tax base of high taxed countries gets eroded.
The proposed solution has two components – the first principle is to transfer the surplus share of the profit to the country-specific market and the second principle involves a minimum tax, which is subject to tax rules.
Some important issues related to profit sharing and the scope of tax rules are still open for talks and are to be resolved. Apart from this, the technical details of the proposal will also be prepared in the coming months. It is expected that by October this will be agreed.
The principles being followed to find a solution reinforce India’s point of maximizing profit sharing in the market, considering the factors of profit investing, cross-border profit transfer The issue should be resolved seriously and the tax rules should be made in such a way that such persons, who are not citizens, try to indirectly access the benefits of the tax treaty between two countries.
India is in favor of a consensus solution that is easy to implement and follow. At the same time the solution must be meaningful and have a sustainable income for the markets of the countries, especially those of developing and emerging economies. India is ready for their implementation on the basis of consensus by quoting principle-one and principle-two. It wants a solution in this regard by October and in this direction it will make a positive contribution to advance the international tax agenda.
