India sees ‘consensus’ by Oct. on OECD-G20 global tax deal

Share of profit allocation, subject-to-tax rules’ scope yet to be addressed, says Finance Minister

NEW DELHI, 13/05/2020: Security personnel seen checking the temperature with the thermal screening device at the Finance Ministry, North Block during the 50th Day of the National Lockdown to prevent spreading of Coronavirus at New Delhi on May 13, 2020. Photo: R. V. Moorthy

A day after joining the OECD-G20 framework for a global minimum tax, the Finance Ministry on Friday said significant issues including share of profit allocation and scope of subject-to-tax rules were yet to be addressed, and a ‘consensus agreement’ was expected by October.

A total of 130 countries on Thursday agreed to an overhaul of global tax norms to ensure multinationals pay taxes wherever they operate and at a minimum 15% rate.

The solution should result in allocation of meaningful and sustainable revenue to market jurisdictions, particularly for developing and emerging economies, the Ministry said in a statement. A majority of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting members (including India) on Thursday adopted a statement containing an outline of a consensus solution to address tax challenges arising from digitalisation of the economy, it added.

It comprises Pillar One — reallocation of additional share of profit to the market jurisdictions, and Pillar Two — regarding minimum tax and subject-to-tax rules.

Deloitte India Partner Sumit Singhania said the consensus would quicken ongoing efforts to reset the almost century-old international tax rules. It provides an objective definition for “largest (sales more than €20 billion) and most profitable (more than 10% global profitability) MNEs to be subject to new nexus and profit allocation rules,” he added.