What is in news : India joins G20-OECD Tax Framework deal.

Details :

• India and majority members of OECD and G20 Inclusive Framework on Base Erosion & Profit Shifting adopted a high-level statement that outlines a consensus solution in a bid to address tax challenges that are arising from digitalisation of economy.
• This proposed solution comprises of two components:
  • First pillar is about reallocation of additional profit share to market jurisdictions and
  • Second pillar comprises of minimum tax and subject to tax rules.
• However, some significant issues like share of profit allocation and scope of subject to tax rules are open and need to be addressed.
• Technical details of proposal will be worked out soon and a consensus agreement will come by October 2021.

Benefits for India

• Reallocate a part of super normal profits of largest and most profitable and multinational groups in market countries like India.
• India gets its fair share of corporate tax on earnings from market it provides to MNEs
• Global Min tax rule will ensure that countries like India gets massive market for MNEs without providing tax safe harbor. This development has the potential to significantly contain practice of treaty shopping.