 The US Treasury Secretary has urged G20 nations to move towards a global minimum corporate tax.

 The US proposal envisages a 21% minimum corporate tax rate, coupled with cancelling exemptions on income from countries that do not legislate a minimum tax to discourage the shifting of multinational operations and profits overseas.
 It also wants the minimum to apply to U.S. companies no matter where the taxable income is earned.
 That proposal is far above the 12.5% minimum tax that had previously been discussed in OECD talks – a level that happens to match Ireland’s corporate tax rate.
 The Irish economy has boomed in recent years from the influx of billions of dollars in investment from foreign multinationals, so Dublin, which has resisted European Union attempts to harmonize its tax rules for more than a decade, is unlikely to accept a higher minimum rate without a fight.
 However, the battle for Ireland and other low-tax countries is less likely to be about trying to scupper the overall talks and more about building support for a minimum rate as close as possible to its 12.5%.

 Major economies are aiming to discourage multinational companies from shifting profits – and tax revenues – to low-tax countries regardless of where their sales are made.
 Increasingly, income from intangible sources such as drug patents, software and royalties on intellectual property has migrated to these jurisdictions, allowing companies to avoid paying higher taxes in their traditional home countries.
 With a broadly agreed global minimum tax, the Biden administration hopes to reduce such tax base erosion without putting American firms at a financial disadvantage, allowing them to compete on innovation, infrastructure and other attributes.
 Organization for Economic Cooperation and Development has been coordinating tax negotiations among 140 countries for years on two major efforts: setting rules for taxing cross-border digital services and curbing tax base erosion, with a global corporate minimum tax part of the latter.
 The OECD and G20 countries aim to reach consensus on both fronts by mid-year, but the talks on a global corporate minimum are technically simpler and politically less contentious.
 The minimum tax is expected to make up the bulk of the $50 billion-$80 billion in extra corporate tax that the OECD estimates companies will end up paying globally if deals on both efforts are enacted.

 The proposal impinges on the right of the sovereign to decide a nation’s tax policy.
 Taxation is ultimately a sovereign function, and depending upon the needs and circumstances of the nation, the government is open to participate and engage in the emerging discussions globally around the corporate tax structure.
 A global minimum rate would essentially take away a tool that countries use to push policies that suit them. A lower tax rate is a tool they can use to alternatively push economic activity.
 Global minimum tax rate will do little to tackle tax evasion.

 A report suggests that the Indian government is not in favour of the new minimum tax rate – the argument being that the new proposal would not be favourable to the Indian economy or Indian businesses.
 Indian statutory corporate tax rates were already slashed from 30% to 22% in November 2019.
 The government’s overall push to increase investment by businesses in India perhaps suggests a further lowering of the rates in the offing – with an indication of things to come perhaps being the earlier reduction in the statutory rate for new manufacturing companies to 15%.
 Analysts fear that this could be a short-sighted approach. In fact, the 2019 rate cut led only to reduced state revenues at a time of increased need, without any concomitant upsurge in economic growth.

 If a foreign company makes profit in India, they have to pay 40% Corporation Tax.
 If an Indian businessman purchases digital advertisement slots in google-adsense or Facebook those (foreign) e-ad companies are making profit.
 But earlier, Google/Facebook did not pay tax on that profit, claiming their business activity (of displaying digital-ads) is done outside India on global servers
 So, Budget-2016 imposed tax on such income/fees of foreign digital advertisement companies.
 Officially called “Equalizations Levy” (EQL), unofficially nicknamed “Google Tax”.
 It’s not part of “Income Tax” or “Corporation Tax” under the Income Tax Act 1961, but a separately imposed by the Finance Bill 2016.
 Foreign Company can’t escape it saying we’re protected under Double Taxation Avoidance Agreement (DTAA) in our home country.

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