Home >Economy >Global tax deal should fetch meaningful revenue to developing countries: FM

New Delhi: Finance minister Nirmala Sitharaman said on Saturday that talks on overhauling the international tax system should yield meaningful revenue for developing countries.

Finance ministry said in a twitter post that Sitharaman lauded OECD-G20 inclusive framework for its work on addressing tax challenges arising from digitalization. The minister also “suggested more work to ensure a fairer, sustainable and inclusive international tax system which results in meaningful revenue for developing economies," the ministry said in its post.

Sitharaman’s emphasis on developing countries like India, which are big markets for global tech giants, getting meaningful benefits from the deal points to intense negotiations on the size of MNCs that would be covered by the new profit allocation norms and how much of their profits from developing countries can be taxed there.

As per the OECD plan, multinational enterprises with global sales above 20 billion euros and profitability above 10% would initially be covered under the deal. The nexus that determines whether a market gets taxation rights is set at 1 million euros in revenue from that jurisdiction. This is above what India has defined as significant economic presence of MNCs under domestic law— 2 crores. For smaller jurisdictions with GDP lower than 40 billion euros, OECD proposed a nexus of 250 000 euros.

G-20 said in a communique at the end of Saturday’s meeting that the remaining issues should be addressed, design elements finalised and a detailed implementation plan should be readied before its next meeting in October.

“We invite all members of the OECD/G20 Inclusive Framework on tax base erosion and profit shifting (BEPS) that have not yet joined the international agreement to do so. We welcome the consultation process with developing countries on assessing progress made through their participation at the OECD/G20 Inclusive Framework on BEPS and look forward to the OECD report in October."

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