New global tax regime in the works, India set to gain
October, 06th 2015
Indian authorities can look to mop up more taxes from purchases made on global etailing portals like amazon.com or ecommerce platforms of Macy's and Asos' with an international agency recommending a major revamp of the global taxation system allowing levy of value added tax in the country where the consumer is located.
In response to a move by the G20 countries, Paris-based OECD on Monday released a new framework called Base Erosion and Profit Sharing, recommending a spate of changes which will require companies to reorganise their operations. Currently , multinationals including the likes of Apple, Google and Starbucks pay low taxes across the globe through ag gressive tax planning, which entails use of a series of tax treaties, and low-tax jurisdictions as well. OECD has estimated that aggressive tax planning by global corporations results in an estimated annual revenue of up to $240 billion (over Rs 15.5 lakh crore), which is more than Centre's tax collection target for the year. This is nearly 10% of the global corporate income tax (CIT) revenues and OECD believes that developing countries would be the major beneficiari es of the proposed tax architecture.
The BEPS proposal, to be discussed by G20 finance ministers on Thursday , will also impact foreign institutional investors operating in India, which, again use tax treaties -such as those with Mauritius -to avoid paying taxes, tax experts said."The whole approach of BEPS is in favour of developing countries. Therefore, Indian authorities should welcome them and corporations should mature to align themselves to the new regime," said Rahul Garg, executive director at PricewaterhouseCoopers.
Although OECD has recommended the implementation of its 15-point action plan by 2020, tax consultants said the government may start moving ahead in some areas from the next budget. "Revenue authorities around the world are seeking more information and transparency in the way multinational companies do business -such that they pay their fair share of taxes in each country ... As and when member countries sign the multilateral instrument, the Indian government will need to filter down the changes into its treaties and domestic law .We should expect to see more action on the ground starting 2016," said Neeru Ahuja, partner at Deloitte Haskins & Sells.