India will also be able to impose 15% tax on multinational companies like Google-Facebook, will help in attracting foreign investment
Global taxation system has been agreed in the countries of the world’s 7 largest economies. These countries are called Group of Seven i.e. G7. These include developed countries like America, Britain, Germany, France, Canada, Italy and Japan. Recently, in a two-day meeting of G7 Finance Ministers and Central Bank Governors in London, an agreement has been reached on 15% Global Minimum Corporate Tax. This means that these countries will be able to take at least 15% tax from multinational companies like Google, Facebook and Twitter.
India will also benefit from this agreement
India will also benefit from the agreement between the G7 countries on the Global Minimum Corporate Tax. Experts say that India’s current tax rate is higher than the global minimum tax rate. This will not affect the companies doing business in India. Rakesh Nangia, the chairperson of Nangia Andersen India, says that with this India will be able to attract foreign investment for its large market. He said that India has good labor at competitive rates, strategic location for exports and a thriving private sector.
India is a big market for tech companies
Amit Maheshwari of consulting firm AKM Global Tax Partner says that India is expected to benefit from the agreement between the G7 countries. This is because India is a big market for tech companies. It remains to be seen how the market will be allocated between countries. At least 15% global minimum tax means that India’s tax system will continue to function and India will continue to attract investment.
Global minimum corporate tax will be the guide for countries like India
Sudhir Kapadia of EY India National Tax Leader says that the Global Minimum Corporate Tax Rate will prove to be a guide for large and developing countries like India. This is because countries like India find it very difficult to keep corporate tax rates low to encourage foreign direct investment. Even India’s announced 15% tax rate for new manufacturing units matches the global minimum corporate tax rate. This will also not affect the efforts to promote manufacturing in India.
Why the need for a Global Minimum Corporate Tax Rate?
Multinational companies avoid paying taxes by hiding profits in countries with low tax rates. To prevent this, a similar tax has been imposed.
With this step, all companies will get equal business opportunities and tax evasion will be curbed.
Many companies take advantage of the loopholes in cross-border taxation to avoid paying taxes. The new agreement will put a stop to this as well.
India reduced corporate tax in September 2019
India had cut corporate tax rates in September 2019. The tax rates for existing companies were reduced to 25%. At the same time, the tax rate on setting up of new domestic manufacturing units was reduced from 22% to 15%.
