India joins the OECD-G20’s ‘Inclusive Framework’ tax deal

A majority of the members of OECD-G20 Inclusive Framework on Base Erosion and Profit Shifting, including India, adopted 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’s about re-allocation of an additional share of profit to the market jurisdictions, and Pillar Two, which consists 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 are yet to be addressed.

Key Points

  • This proposed solution comprises of two components:
  • First pillar is about reallocation of additional profit share to market jurisdictions and
  • Second pillar comprises of minimum tax and subject to tax rules.
  • However, some significant issues like share of profit allocation and scope of subject to tax rules are open and need to be addressed.
  • Technical details of proposal will be worked out soon and a consensus agreement will come by October 2021.

How will it impact India?

Pillar I of OECD and G20 two-pillar solutions of addressing tax challenge seeks to show a special purpose nexus rule and profit allocation formula to reallocate a part of super normal profits of largest and most profitable and multinational groups in market countries like India and China. The outcome will have quantitative benefits on India as it will ensure that India gets its fair share of corporate tax on earnings from market it provides to MNEs. Pillar II is the most significant step towards the race to bottom. Global Min tax rule will ensure that countries like India gets massive market for MNEs without providing tax safe harbour. This development has the potential to significantly contain practice of treaty shopping.

Latest articles

For the second dosage of Covid vaccination, Sputnik V has met a production snag

Sputnik V, a Russian spacecraft, is said to have hit a snag in the development of the second dose of its Covid-19...

Aditya Ghosh, the former CEO of IndiGo, has joined Rakesh Jhunjhunwala’s Akasa Air. You should be aware of him

In the Indian aviation business, Aditya Ghosh is a well-known figure. For a decade, he was the president and sole director of...

Elon Musk’s Complaint about Apple goes Viral

Elon Musk, the CEO of Tesla Inc, is displeased with Apple's App Store fees. Apple app store payments, according to Musk, are...

Maharashtra RERA blacklists 644 residential projects in state, bars sale

To protect the interest of home buyers MahaRERA has recently released the list of 644 residential projects that are completely prohibited from...

Related articles

Leave a reply

Please enter your comment!
Please enter your name here