Global internet giants such as Google, Facebook, Amazon, LinkedIn and Netflix could face larger domestic tax liability in India after OECD (Organisation for Economic Co-operation and Development) postponed a common tax framework for global companies. This move will allow countries like India to go ahead with their own plan to tax the internet companies.
According to a report, earlier, OECD was expected to come out with a common tax framework by December this year, but now it is expected to do so by mid-next year.
This could mean that most countries including India would implement their own plans to tax these companies rather than waiting for OECD’s framework on how to tax digital giants.
Worth mentioning here is that india has already started partly taxing these global giants under equalisation levy and has also introduced significant economic presence (SEP) framework last year.
“India was only waiting for the OECD to give some guidance around how economies must tax these global giants. Now that no consensus seems to be emerging, most large economies would go ahead with their own domestic taxes and regulations,” the business daily quoted a person close to the government as saying.
OECD had been trying to bring large economies on one page under its Base Erosion and Profit Shifting (BEPS) framework. “India too deferred the implementation of SEP until April 2021. We may not wait any longer and that would mean digital majors can be taxed in India on global profits based on their India revenues in certain cases. This would be in addition to the unilateral measure of Equalisation levy introduced recently,” Ajay Rotti, Partner, Dhruva Advisors, told the publication.
India in 2018 had said that global digital companies have a large consumer base in the coutry but don’t pay enough taxes domestically. meanwhile, US has already threatened reciprocal treatment of any ecoomy that attempts to tax the digital giants. US has already launched an investigation in June on how some of the countries including India are taxing digital companies such as Google, facebook, Amazon.
There is a global push to bring the digital giants under the ambit of local taxes as these companies base themselves in low-tax jurisdictions.
India’s SEP framework tries to tax global giants taking their user base into consideration, a move objected by the US. Tax experts say that the race to tax digital giants is set to create problems for some of the larger companies operating in India.