New Delhi: India is likely to benefit from the global minimum tax rate of 15 percent, which is colored by the richest countries in the world, as the effective local tax rate is above the threshold, and the country will continue to attract investment, tax experts said on Sunday.
The finance ministers of the G-7 countries, consisting of the USA, the United Kingdom, Germany, France, Canada, Italy and Japan, reached an important agreement on Saturday on the taxation of multinational companies, according to which the minimum global tax rate would be at least 15 percent. They also agreed to introduce measures to ensure that businesses pay taxes in the countries in which they operate, aimed at stopping loopholes in cross-border taxation.
Nangia Andersen chairman Rakesh Nangia said the G7 commitment to the global minimum tax rate of 15 per cent worked well for the US government and most other countries in Western Europe. However, some low-tax European tax areas such as the Netherlands, Ireland and Luxembourg and some in the Caribbean rely heavily on tax rate arbitrage to attract MNCs.
In September 2019, India reduced corporate taxes for local companies to 22 percent and to 15 percent for new domestic manufacturing units. The concessionary tax rate has also been extended to existing local companies under existing conditions.
The consulting firm AKM Global Tax Partner Amit Maheshwari said that India is expected to benefit from it as it is a large market for a large number of technology enterprises. ‘It remains to be seen what the division between market countries will be like. The global minimum tax rate of at least 15 percent also means that the forward Indian tax regime will in all likelihood continue to work, and India will continue to attract investment, ”Maheshwari added.
India’s national tax leader, Sudhir Kapadia, has said that the global tax treaty is a pioneer, especially for large and developing countries such as India, which will always find it very difficult to artificially lower corporate tax rates in a effort to increase the much-needed foreign direct investment in the country.
‘Even the newly announced lower rate of 15 per cent for new manufacturing units in India almost meets this new threshold, and therefore does not affect the much-needed boost for manufacturing in India. Equally important is the explicit allocation of tax rights to ‘market countries’ for a share of the global profits of multinational companies, which brings the right to tax in line with the place of economic contribution,’ Kapadia added.
The decision of the Group of Seven (G-7) Advanced Economies will be presented to the G-20 countries, a group of developing and developed countries, at a meeting scheduled for Venice in July.
Source: Telangana Today