- The pandemic has goaded many countries to adopt innovative methods that were hitherto considered as impossible and against the interests of the country to not only sustain economic activities in line with the demanding realities on the ground but also to reassure the citizens battered by the unabated destruction witnessed over the last year and a half. Rich and poor countries alike are leaving no stone unturned in drumming up whatever support, assistance, and wherewithal coming their way to ensure adequate succor is provisioned to people to infuse hope amidst despairing scenarios. Fiscal stimulus packages offering a variety of relief to the common people is par for the course measures adopted by all countries in cushioning the damages.
PC: Cynthia Brumfield
- The global leadership forums in the form of G7 countries too are joining hands in their efforts to address the parity issue surrounding the business interests of several conglomerates and behemoths to ensure a level playing field for all concerned. In this backdrop, the G7 countries agreeing to a global minimum corporate tax rate of 15%, and the rule that multinational companies irrespective of the nature of their businesses must pay taxes where they operate, are pathbreaking proposal which deserves to be welcomed. In doing so, they put on notice both tax havens, a list that includes countries like Ireland and China’s Hong Kong, as well as global technology behemoths like Google’s parent Alphabet, Facebook, and Amazon, respectively.
- People in the know would concur that these MNCs, in part taking advantage of businesses built on digital platforms, create a maze of subsidiaries and park most of their revenues in tax havens, denying governments of major markets taxes and putting companies which duly pay taxes at a great disadvantage. G7’s agreement should be followed through quickly by, first, G20’s agreement and, second, framing the rules of the new system. G20 members, India is also a part of the group and an invitee in G7 should persuade China, which may be concerned about Hong Kong, that it will gain far more than it will lose under the new system. What it portends to India vis-à-vis the global minimum tax rate is quite interesting looked from the business perspectives.
PC: Parag Diwan
- India is one of the world’s largest internet markets by size, and one in which the average value of transactions will go up rapidly, we lose out badly when these technology MNCs take advantage of the tax loophole by escaping the corporate tax net. Supporting tax regimes like the equalization levy and the concept of significant economic presence introduced in IT rules and correct steps, but do not compensate for revenue lost under the same. As you are aware, India’s corporate tax rate was slashed to 22% in general and to 15% for greenfield manufacturing companies in September 2019. However, with cess and surcharge, the effective tax rate for existing domestic corporates is roughly 25.17%.
- Thus, the Government of India should boldly undertake another corporate tax reform by lowering domestic rates significantly and in line with the global minimum tax rate of 15%. The pandemic has altered the way any country is run, and India is no exception to the rule. Make no mistake, there is no way but to provide a fillip to ensure sustained private investment and industrial employment which is the only sure shot measure to make our country emerge out of the present conundrum and traverse on the path of recovery.