India Likely to Benefit from Global Minimum 15% Corporate Tax Pact: Experts

On Sunday, according to tax experts, the global minimum 15% corporate tax rate deal is expected to benefit India. The deal was signed by the global richest countries as the current domestic tax rate is above the threshold.

On Saturday, the Finance Ministers of G-7 countries, including the US, the UK, Japan, Italy, Germany, France and Canada attained a historic contract on taxing multinational firms as per which the minimum global tax rate would be at least 15%.

To close the cross-border taxation gaps, the ministers also agreed for a measure to allow businesses pay taxes in the countries where they operate.

Nangia Andersen India Chairman, Mr. Rakesh Nangia said, “The G7 pledge to 15% global minimum tax rate bodes well for the US government and western Europe countries. However, to attract MNCs, some countries mainly rely on tax rate arbitrage, for instance Luxembourg, Netherlands, Ireland, etc.

He added, “Since the global pact impacts the right of the sovereign to determine a country’s tax policy, it may face the challenge of onboarding other major countries on the same page.”

In September 2019, India had reduced corporate taxes for domestic firms 22% and to 15% for new domestic production plants. The concessional tax rate was offered to the current domestic firms as well, subject to certain terms.

Mr. Amit Maheshwari, Consulting firm AKM Global Tax Partner, said, “India is likely to benefit from the global pact as it is a huge market for a large number of tech firms.”

He added, “It stays to be noticed how the provision would be between market countries. Also, the global minimum tax of at least 15% means that Indian tax regime would still work in all probability of the concessional, and the country would go on to interest investment.”

EY India National Tax Leader, Mr. Sudhir Kapadia said, “The global corporate tax pact is a revolutionary for all and especially for India to increase foreign direct investments in the country.”

In a meeting scheduled for July 2021 in Venice, the Group of seven (G-7) advanced economies decision would be put before the G-20 countries, a group of developing and developed countries.

Mr. Nangia said, “Companies using low-tax jurisdiction get impacted by the global minimum rate, to achieve low global tax cost. Moreover, India attracts foreign investment due to its substantial internal market, value labour at competitive rates, strategic place for exports, and a prosperous private sector.”

On Saturday, OECD Secretary-General Mr. Mathias Cormann said, “The decision of the global pact is a landmark move toward the global consensus required to modernize the international tax system.”

He added, “There is significant amount of work pending. But this decision enhances momentum to the upcoming discussions among jurisdictions of the OECD/G20 Inclusive Framework on BEPS and the 139 member countries, where we would seek a final agreement confirming that multinational firms pay their fair share everywhere.”

Deloitte India Partner, Mr. Rohinton Sidhwa said, “The advantage of the minimum tax rate should accumulate by first offering a right to tax a share of profit of the big global digital MNEs. Secondly, it would close various digital taxes that have flourished globally similar to the equalization tariff in India. Thirdly, it surfaces the path for modifications in global tax agreements pursuant to the agreement being attained.