New Delhi: India has joined 130 member nations of OECD/G20 in adopting a two-pillar plan on international taxation rules to address the tax challenges arising from the digitalization of the economy and cross-border profit-shifting.
“Majority of the members OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (including India) adopted yesterday a high-level statement containing an outline of a consensus solution to address the tax challenges arising from the digitalisation of the economy,” the Ministry of Finance in a statement said today.
This new framework of OECD (Organisation for Economic Co-operation & Development) will also ensure that multinational enterprises pay a fair share of tax wherever they operate.
The proposed solution consists of two components- Pillar one which is about reallocation of an additional share of profit to the market jurisdictions and Pillar two consisting of minimum tax and subject to tax rules, the statement read.
Some significant issues including share of profit allocation and scope of subject to tax rules, remain open and need to be addressed, it said.
Further, the technical details of the proposal will be worked out in the coming months and a consensus agreement is expected by October.
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 the 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, the statement read.