India Urges G20 to Increase Taxes on Excess Profits of Multinational Companies
India is urging its Group of 20 (G20) partners to support a proposal that would raise the share of taxes paid by multinational companies to countries where they earn excess profits. The proposal, which has not been previously reported, could dampen optimism among G20 members hoping for progress on global corporate tax reform at a meeting of finance ministers and central bankers in Gujarat.
The current rules on global corporate taxation are considered outdated, as digital giants like Apple and Amazon can book profits in low-tax countries. A 2021 deal agreed upon by over 140 countries aims to overhaul these rules, with a minimum 15% tax on large global firms and an additional 25% tax on excess profits as defined by the Organisation for Economic Cooperation and Development (OECD).
However, concerns have been raised by several countries about the multilateral treaty underlying the reform, leading some analysts to believe the overhaul is at risk of collapse.
India has proposed suggestions to the OECD to ensure its due share of taxing rights on excess profits earned by multinational companies. These suggestions will be extensively discussed during the G20 meeting, which takes place on Monday and Tuesday.
The Indian government aims to see significant increases in taxes paid in countries where multinational firms operate. While the exact amount India is seeking has not been specified, the proposal aligns with India’s goal of securing a higher share of taxes for markets where companies conduct business. As the world’s most populous country and one of the largest consumer markets, India’s average income is expected to grow substantially in the coming years.
In addition to advocating for a larger share of excess profits, India will propose that withholding taxation be separated from the principle of excess profit tax. Under current rules, countries offset their portion of taxes with the withholding tax they collect. Withholding tax is collected by companies when making payments to vendors and employees and is remitted to tax authorities.
The OECD has acknowledged concerns raised by a few jurisdictions regarding the allocation of taxing rights among countries. Efforts to address these issues and prepare the Multilateral Convention for signature are underway, according to a document issued by the OECD.
India’s push for a reevaluation of corporate taxation aligns with its goal of ensuring fair revenue distribution and capitalizing on its burgeoning consumer market. The discussions at the G20 meeting will shed light on the support India receives from its G20 partners and could potentially impact the future of global corporate tax reform.
It remains to be seen how these discussions will unfold, but India’s proposal introduces the possibility of changes to the global corporate tax landscape and highlights the need for a balanced approach that benefits all countries involved. As the G20 meeting kicks off, all eyes will be on the decisions made and the potential impact they will have on multinational companies and the global economy.
