G7 Proposal on MNC Tax: India Wants Wider Ambit

India is likely to pitch for a wider application of the global proposal to tax multinationals endorsed by the G7, seeking that it cover all of those identified by the OECD and not just the top 100 as, well as a higher share, said officials aware of the matter.

Earlier this month, the G7 countries endorsed a proposal to impose a minimum tax on MNCS and digital enterprises, which have usually paid low taxes or avoided taxes or avoided taxes altogether by shifting profits to low tax jurisdiction. The G7 proposal envisages running a pilot with 100 MNCS as against about 2,000 that were identified by the OECD.

If the proposal is accepted, India would have to remove the 2% equitation levy on sales of digital multinationals even as the current proposal may not yield as much revenue. A wider application would ensure India does not lose tax under the new regime.

The proposal is expected to taken up in July at the G20-OECD Inclusive Framework on base erosion profit sharing (BEPS). The framework brings together 139 countries. The G20 is a group of key global economic including India that account for 80% of word GDP. “India would want a wide application of the tax proposal to cover all MNCS,” said a government official, adding that restricting it to a select few would not achieve the objective few would not achieve the objective behind the move.

“Moreover, India would also want a higher share in revenues apportioned.”

The G7 plan suggests taxing rights for market jurisdiction where customers are located on at least 20% of profit exceeding a 10% margin for the largest and most profitable MNCS.S-ET

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