PremiumNew Delhi: US treasury secretary Janet L. Yellen and India’s finance minister Nirmala Sitharaman have discussed Washington’s proposal for a global minimum tax, which is expected to be taken up at the G-20 meeting in July for a broader consensus.
In a statement on 29 June, US Department of treasury said, “Secretary Yellen discussed that the United States and India have a shared interest in implementing a robust global minimum tax."
It also said that Yellen stressed the importance of partnership with India in the G20 and the Organisation for Economic Co-operation and Development (OECD) “to seize a once-in-a-generation opportunity to remake the international tax system to help the global economy thrive."
India is yet to issue a statement about the discussion. An email sent to the finance ministry remained unanswered at the time of publishing.
The Joe Biden administration had proposed a 21% global minimum tax aimed at low tax countries like Ireland but G-7 nations agreed earlier this month for a 15% global minimum tax.
The proposal will also allow taxation rights to countries like India where some of the largest technology giants have customers but conventional tax methods are inadequate to tax them. Countries like India and France have resorted to other tax methods unilaterally since a global consensus on taxing digital corporations was elusive.
A consensus on global minimum tax could help the US to raise taxes without risking flight of capital to low tax countries and give countries like India the right to tax tech giants who serve Indian consumers without a place of business here—a key concept in conventional taxation. India will not have to raise corporate tax as part of the deal as the applicable rate here is either at par—only for new manufacturing companies--or higher. But India may insist on the tax provisions covering offshore digital corporations to be as broad as possible.
India has been applying an equalisation levy on offshore digital economy firms, which will have to be withdrawn once a new global tax treaty comes into force. Such levies by India and other countries have displeased the US. Washington recently gave six countries, including India, 180 days to complete multilateral talks on the proposed global taxation framework. These countries are on a US target list for retaliatory tariffs.
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