India along with majority members of OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting adopted a high-level statement on July 1, 2021. The statement comprises an outline of a consensus solution to address the tax challenges arising from the digitalisation of the economy.
| The proposed solution consists of two components- Pillar One -which is about reallocation of additional share of profit to the market jurisdictions Pillar Two - which consists of minimum tax and subject to tax rules. |
The statement highlighted that some significant issues including share of profit allocation and scope of subject to tax rules, remain open and need to be addressed. The technical details of the proposal will be worked out in the coming months and a consensus is expected to be reached on the agreement by October 2021.
Objective
The OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) aims to address all the loopholes in cross-border tax rules.
Key Highlights
• Around 139 countries are collaborating within OECD/G20 Inclusive Framework on BEPS for the implementation of 15 measures to tackle tax avoidance, improve the coherence of international tax rules
• BEPS refers to tax-avoiding strategies used by big multinational companies, which exploit the gaps and mismatches in tax rules across geographies.
• The principles underlying the solution vindicate India’s stand for a greater share of profits for markets and consideration of demand-side factors in profit allocation.
• They also underline the need to seriously address the issue of cross-border profit shifting and the need for subject to tax rule to stop treaty shopping.
India's proposition• India is in favour of a consensus solution that is simple to implement and simple to comply with. • India also feels that the solution should result in the allocation of meaningful and sustainable revenue to market jurisdictions, particularly for developing and emerging economies. • India will continue to constructively engage to reach to a consensus to implement a solution with Pillar one and Pillar two as a package by October and contribute positively for the advancement of the international tax agenda. |
What is OECD? |
| • The Organisation for Economic Co-operation and Development (OECD) is an intergovernmental economic organisation with 38 member countries. • The organisation was founded in 1961 to stimulate economic progress and world trade. Its member countries are committed to democracy and market economy. • OECD provides a platform to its member countries to compare policy experiences, seek answers to common problems and identify good practices and coordinate domestic and international policies of its members. • The OECD publishes and updates a model tax convention, which serves as a template for allocation of taxation rights between countries. |
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