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Economy
Pradeep Kumar

03/07/21 11:00 AM IST

OECD/G20 Inclusive Framework tax deal

Context

Majority of the members OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting(including India)adoptedyesterday ahigh-level statement containing an outline of a consensus solution to address the tax challenges arising from the digitalisation of the economy.
In news

India joins OECD/G20 Inclusive Framework tax deal.

Components
  • Pillar One which is about reallocation of additional share of profit to the market jurisdictions.
  • Pillar Two consisting of minimum tax and subject to tax rules.
Issue
  • Some significant issues including share of profit allocation and scope of subject to tax rules, remain open and need to be addressed.
  • Further, the technical details of the proposal will be worked out in the coming months and a consensus agreement is expected by October.
Solution
  • The principles underlying the solution vindicates India’s stand for a greater share of profits for the markets, consideration of demand-side factors in profit allocation, the need to seriously address the issue of cross border profit shifting, and the need for subject to tax rule to stop treaty shopping.
  • India is in favour of a consensus solution which is simple to implement and simple to comply.
  • At the same time, the solution should result in allocation of meaningful and sustainable revenue to market jurisdictions, particularly for developing and emerging economies.
  • India will continue to be constructively engaged for reaching a consensus-based ready to implement solution with Pillar one and Pillar two as a package by October and contribute positively for the advancement of the international tax agenda.
Source: PIB

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