G24 nations call for gradual withdrawal of ‘Google tax’
Worried that the proposed global digital tax deal covering only top 100 companies may not lead to sufficient revenue for developing countries, India, along with other Group of 24 (G24) member nations, has objected to the withdrawal of unilateral measures like the equalisation levy (EL) in one go.
The stand by the emerging markets grouping could potentially derail the finalisation of the global multilateral solution to tax large digital companies such as Google, Facebook, and Netflix in October. The October meeting of the Organisation for Economic Cooperation and Development (OECD) on global digital tax is being finalised on the broad understanding that unilateral measures, such as EL, would be withdrawn when the worldwide tax system comes into effect.
The global solution is aimed to ensure multinational entities pay more taxes in countries where they have customers or users than from where they operate.
In a comment to the OECD Inclusive Framework Secretariat on the Two-pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy, the developing countries grouping also recommended that no less than 30 per cent of tax on non-routine profits of these companies should be allocated to market jurisdictions where they have sales.
The Pillar 1 proposal talks about taxing companies with
20-billion-euro revenues and a profit margin above 10 per cent, which will be reviewed after seven years to cut the threshold to 10 billion euros.
The G24 now pressed for a gradual removal of unilateral measures, simultaneous to revenue gains from the implementation of Pillar 1.
“The G24 is of the view that the proposed appropriate coordination between the application of the new international tax rules and the removal of digital services tax and other relevant similar measures on all companies should not be at once; rather removal or standstill of such unilateral measures should be gradual and progressively alongside the implementation …. on such companies,” said the G24 in the comment.
Further, if developing
countries are expected to withdraw unilateral measures due to agreement on Pillars 1 and 2, there should be sufficient revenue under Pillar 1, it added.
India has been fighting for taxing rights for source countries where the markets are on the basis of sales in their territories, despite no physical presence. However, the outline of the proposal only talks about top 100 companies. For these companies, a portion of their profits would be taxed in jurisdictions where they have sales. Between 20 and 30 per cent of non-routine profits above a 10-per cent margin may be taxed. The G24 in its comment sought reallocation of profit of no less than 30 per cent on their non-routine profits.
The G24 comment seems to suggest that the unilateral measures like the EL should be withdrawn only for those companies that will get covered under the Pillar 1 proposal now and pay tax to the market jurisdictions, said Akhilesh Ranjan, former member, Central Board of Direct Taxes.
to 20 per cent. The family sold their stake in ZEEL to repay loans worth ~13,000 crore, taken from Indian banks for failed diversifications like infrastructure development.
"We have engaged with Sony in the past and this deal was signed after several months of discussions with Sony,” Punit Goenka told an investor call in the evening. Geonka said the deal was subject to approvals from the Competition Commission of India and Sebi.
Speaking about the transaction, R Gopalan, chairman, ZEEL, said the board had conducted a strategic review of the merger proposal between SPNI and ZEEL. “As a Board that encompasses a blend of highly accomplished professionals having rich expertise across varied sectors, we always keep in mind the best interests of all the shareholders and ZEEL. We have unanimously provided an in-principle approval to the proposal and have advised the management to initiate the due diligence process,” Gopalan said.