The global corporate tax agreement engineered by Organisation of Economic Cooperation Development offers more equitable taxation of Multi National Corporations. Explain (200 Words)
Refer - Business Line
Enrich the answer from other sources, if the question demands.
IAS Parliament 3 years
KEY POINTS
· The global corporate tax agreement engineered by OECD and spearheaded by the US puts forth a feasible solution to address these issues.
· While a concerted attempt to address these concerns began in 2015 with the adoption of OECD’s Base Erosion and Profit Shifting package by 140 countries including India.
· The formula proposes that 25 per cent of pre-tax profits exceeding 10 per cent of MNCs with revenue above €20 billion shall be taxed in jurisdictions where the revenue is earned.
· While India will have to cease its equalisation levy on foreign digital players, the right to tax the revenue earned by these companies in India is likely to compensate the loss to some extent.
· With 136 countries accounting for 90 per cent of the global GDP signing the agreement, there is likely to be substantial reduction in tax evasion following the implementation.
· Making low-tax jurisdictions such as Ireland, Estonia and Hungary join the deal paves the way for smooth implementation.
· The deal should be welcomed by all jurisdictions since it will help establish a more equitable global tax system and free countries from long drawn litigations with large MNCs.
Manish 3 years
IAS Parliament 3 years
Good attempt. Keep Writing.
