(Image source from: financialexpress.com)
More than 130 countries of the globe including India agreed for the Global Minimum Tax of 15 percent that will be levied on the multinational companies which are making huge profits but are paying a small percentage of profits as tax. All the countries which agreed to the proposal will impose a 15 percent tax on the global companies. This is proposed by the USA to counter the efforts made by several multinational companies to escape the taxes in their country. The USA says that a taxation structure will be developed. The Global Minimum Tax is based on re-allocation of the additional share of the profit and the minimum tax. All the big firms will be brought under the tax net through Global Minimum Tax.
Most of the firms are operating from several countries but they do not own a pace of business and they route these earnings to low tax jurisdictions. All these firms save crores of money from their profits without paying any tax. Facebook and Alphabet are the best examples as they are earning huge profits when compared to the minimum taxes that they pay. 130 countries agreed to Global Minimum Tax and the loopholes in the law will continue to benefit the firms till all the nations give their nod. The framework of Global Minimum Tax is expected to be finalized by October this year and it will be implemented from 2023.
India is quite positive on Global Minimum Tax as several digital companies are earning huge and there is a large user base in India. India is the first country to introduce an equalization levy which makes the non-resident companies pay taxes before the payments. India is a key player for several firms because of its huge population and increasing users of all the digital platforms, apps. Indian government is quite positive that the Global Minimum Tax will be implemented soon.
By Siva Kumar