NEW DELHI: Tax experts say the G7 decision to raise the global minimum corporate tax rate to 15% will benefit various countries, including India.
At a two-day meeting in London, the G7 finance ministers agreed on a concerted approach to multinational corporations’ tax increases. According to the agreement, a 15% tax will be levied on giant companies. The G7 also accepts that multinational firms must pay taxes not only at their headquarters, but also in each country in which they operate.
The G7 statement reads: “We also commit to a global minimum tax of at least 15% on a country by country basis. We agree on the importance of progressing agreement in parallel on both pillars and look forward to reaching an agreement at the July meeting of G20 Finance Ministers and Central Bank Governors.”
Rakesh Nangia, Chairman of Nangia Andersen India, said that the global minimum tax rate of 15% works well for the US government and most other Western European countries. However, he added that some low-tax European jurisdictions, including Ireland, rely heavily on tax rate arbitrage to attract MNCs.
In 2019, India reduced corporate taxes for domestic firms to 22% and for new domestic manufacturing units to 15%.
Consulting firm AKM Global Tax Partner Amit Maheshwari said the move would attract a number of technical companies. “It remains to be seen how the allocation would be between market countries. Also, the global minimum tax of at least 15 per cent means that in all probability the concessional Indian tax regime would still work, and India would continue to attract investment,” Maheshwari said.
EY India National Tax Leader Sudhir Kapadia said the decision to set a global minimum tax rate is a major turning point, especially for large and developing countries like India. OECD Secretary-General Mathias Cormann said the unified tax was a milestone in the international tax system.
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