Finance ministers of rich G7 nations on Saturday reached a historic agreement to push for a global floor of 15% corporate tax so that no jurisdiction dangles a lower rate as bait for investment, and, as US treasury secretary Janet Yellen put it, a race to the bottom among tax regimes comes to an end. The G7 pact also envisages a levy on large multinationals that would make them shell out more money to tax authorities in the markets they operate. If the G20 okays the deal in July, the pressure will mount on all countries to accept these proposals.
As India’s effective corporate tax rate is higher than the minimum proposed, the country doesn’t expect to charge any lower than 15% and has long been a net loser of business to tax havens, New Delhi should back this idea. It has also been an old grouse of ours that Big Tech firms like Google and Facebook profit from audiences here but get away cheaply tax-wise. A fairer global split-up of their liabilities should serve our interests well. But these reforms can make a difference only if a global consensus is forged. This will take hard work. Taxation is a sovereign right, and nations that stand to lose out will surely put up some resistance.
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