India will use its position as host of the G20 meeting to push for backing from its member countries on a proposal to raise taxes on multinational corporations “excess profits” in the countries where they generate those profits. This previously unreported proposal could potentially dampen optimism among G20 members hoping for progress on the long-awaited global corporate taxation overhaul.
Over 140 countries were scheduled to begin implementing a deal in 2022 that would modernize outdated rules governing how multinational companies are taxed. However, concerns and disagreements have emerged, putting the overall reform plan at risk.
The current deal, championed by the United States, entails imposing a minimum 15% tax on large global firms, along with an additional 25% tax on “excess profits” as defined by the Organisation for Economic Cooperation and Development (OECD). India has presented suggestions to the OECD seeking a greater share of taxing rights on excess profits.
During the upcoming G20 meeting, these proposals will be extensively discussed. While specific details on the desired increases in tax payments were not disclosed, India aims to secure a more significant tax contribution in the countries where multinational companies conduct their business.
India’s push for a higher share of taxes aligns with its status as the world’s most populous country and its projected growth as a major consumer market. The Indian government envisions its citizens’ average income to increase more than thirteen-fold by the end of 2047.
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As part of its proposal, India will also recommend separating the withholding tax from the excess profit tax principle. Under the current rules, countries offset their tax share with the withholding tax they collect, which is deducted by companies when making payments to vendors and employees.
Efforts to resolve concerns and allocate taxing rights among countries are underway, according to the OECD. The organization acknowledged that a few jurisdictions have expressed reservations about the tax allocation. It emphasized the need to expedite the preparation of the Multilateral Convention for signature. The outcome of the discussions during the G20 meeting will have significant implications for the global corporate taxation framework and the equitable distribution of tax revenues from multinational companies’ excess profits.
Source : Reuters
