fbpx

G7 Nations agree on global minimum tax of at least 15%

  • IASbaba
  • June 8, 2021
  • 0
UPSC Articles
Print Friendly, PDF & Email

G7 Nations agree on global minimum tax of at least 15%

Part of: GS Prelims and GS -II – International Relations & GS-III – Economy 

In news

  • A group of the world’s richest nations reached a landmark deal to close cross-border tax loopholes used by some of the world’s biggest companies.
  • The Group of Seven (G7) would support a minimum global corporation tax rate of at least 15%. 
  • They would put in place measures to ensure taxes were paid in the countries where businesses operate.

How will it work? 

  • Global minimum tax rate would apply to Overseas profits. 
  • Governments could set whatever local corporate tax rate they want, but if companies pay lower rates in a particular country, their home governments could top-up their taxes to the minimum rate, thus eliminating the advantage of shifting profits. 
  • The Organisation of Economic, Cooperation and Development (OECD) has also been coordinating tax negotiations on rules for taxing cross-border Digital Services and curbing tax base erosion, including a global corporate minimum tax. 
  • Also, countries would lose the device used to push policies that suit them once a global minimum rate is put in place. 

Impact on India 

  • The decision is likely to benefit India as India has wanted to keep corporate tax rate artificially lower to attract FDI in comparison to tax havens or low taxation countries. 

For a dedicated peer group, Motivation & Quick updates, Join our official telegram channel – https://t.me/IASbabaOfficialAccount

Search now.....