Digital Tax Proposal : India Needs A Consensus-Based Solution

Digital Tax Proposal : India Needs A Consensus-Based Solution

If we analyse the OECD 2015 Base Erosion & Profit Shifting (BEPS) produced the rules regarding International taxation.


Digital Tax Proposal: India Needs A Consensus-Based Solution :

The spread of Digitization has made major changes in the manner of operating businesses at all levels. It leads to the advent of new models to facilitate easy processing. Due to this major transformation, the International taxation system gets pressurized. It has led to changes in the basic rules of international taxation.

If we analyze the OECD 2015 Base Erosion & Profit Shifting (BEPS) produced the rules regarding International taxation. It has the basic principle that the location of the taxable profits should be performed within the location where the economic activities and the value creation happens.


Analyzing The OECD Report 2020 :

If we analyze the report of OECD 2020 pillar one blueprint which aims to address the challenges of the Global taxation process. The main motive of pillar one is to make a global deal on changing the rights of taxing on the business profits. 

There Are Three Important Elements of The Proposal which we get to Consider in The Below-mentioned Steps;

  • There were new taxing rights for the market jurisdictions over the share of residual profits. It is in the relation of Transnational Corporation.
  • There should be a fixed return for the marketing & distribution activities which are taking place in the market.
  • The aim is to make tax certainty more effective by the way of dispute resolution & grievance redress mechanisms.

 

Analyzing The Trend :

1. India is not likely not to accept the G7 taxation proposal for the multinational corporation. The developing economies like India & others have different views on taxing the multinational corporation in the countries in which they are operating.

2. The G7 proposal requires the profitable transnational corporation with at least a 10% profit margin for paying the taxes in the country of operating their businesses.

3. The finance ministers of G7 get agreed on the 15% limit of paying the taxes in which the Multinational Corporation operates their business.


Opinions & Intersections :

According to the CEO of Dhruva advisors “The main motive of United states to save their tax base. Countries like India are not ready to accept the proposal. India is sufficient in substituting the allocation of profit within the limit of the existing equalization levy.”

According to Former RBI Board Member” The main emphasis of India is on the apportionment of the profits which has been earned by the giant MNCs. Detailed negotiations in case of Global Taxation proposal is a complex task”


Indian Economy & Proposal” :

1. About India & Other developing economies the proposal has both sides these countries are not ready to accept it because their equalization levy provides them a higher share in the profits.

2. India & Other developing economies are burdening for tax on the Global; giants that get profit from data-rich & high consumption economies.

3. Indian experts said that the Global consensus on the Digital tax proposal is hard to reach. It has been a major issue for many years in international organizations like Organization for Economic Cooperation and Development.

4. Indian economic experts maintained that it is better to extract the equalization levy from the profits of multinational companies.

5. India has introduced numerous measures to addresses the taxation issues which are arising from digitization. These steps are of various kinds like the Equalization levy on the digital transaction to bring transparency. These measures aim to facilitate the smoother operation of International Businesses without hampering digitization.


Wrapping Up :

Undoubtedly, it is a matter of concern that the inadequacy of the current rules to deal with the wide taxation challenges around the world. Digitization & Businesses should go hand in hand. As we know that the developing economies are taking time to transform their systems Digitally. So, the effectiveness of this proposal can be challenged by the Digitization of the economies. It is really important to facilitate the process and bring the global consensus on this matter.

 

Edited By Team CLIQTAX

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