Encouraging accord: On global minimum tax

The political will shown by G7 to ensure fairness in revenue sharing is a good augury

The OECD, which is with the G20 spearheading the ‘Inclusive Framework on Base Erosion and Profit Shifting’ initiative aimed at ending tax avoidance, estimates that countries are collectively deprived of as much as $240 billion in tax revenue annually due to avoidance by MNCs. As the OECD’s Secretary-General noted in a statement welcoming the G7 deal, such distortions “can only be effectively addressed through a multilaterally agreed solution”. The G7 also agreed on “an equitable allocation of taxing rights, with market countries awarded taxing rights on at least 20% of profit exceeding a 10% margin for the largest and most profitable multinational enterprises”. For India, estimated to be losing more than $10 billion in revenue each year to “global tax abuse” by MNCs according to the Tax Justice Network and one of the more than 90 countries that have joined the BEPS framework, a wider agreement at next month’s meeting of G20 Finance Ministers and central bank Governors could have far-reaching implications. India could benefit from the levy of taxes on MNCs including technology and Internet economy giants, which have taken advantage of the loopholes in the global tax system. While there are still wrinkles to be ironed out, including the issue of local levies on digital transactions, the political will to ensure greater fairness and equity in revenue sharing is a positive augury.

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