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Consensus to play key role: FM on taxing digital firms like Google, Facebook

Amid ongoing efforts to address tax challenges arising from the digitalisation of the economy, Finance Minister Nirmala Sitharaman on Monday said that a consensus solution is required to ensure fairness and sustainability of tax systems.

“A consensus solution will play an important role in ensuring fairness, equity and sustainability of tax systems,” FM Sitharaman said while addressing a meeting of BRICS finance ministers and central bank governors. The agenda of the meeting included discussions on the outcomes of G20 Saudi Presidency in 2020, a digital platform to encourage infrastructure investments and expansion of the membership of the New Development Bank.

Globally, as many as 137 countries, including India, are in talks to reach a consensus-based long-term solution to the tax challenges arising from the digitalisation of the economy. The negotiations, however, have been slowed by the COVID-19 pandemic and political differences.

Last month, the Organisation for Economic Co-operation and Development (OECD), an intergovernmental economic organisation, had proposed Pillar 1 and Pillar 2 tax proposal for taxing digital companies like Google, Facebook and Netflix, and ushering in a global minimum tax rate. The deadline to arrive at a consensus has been pushed to mid-2021 from December 2020.

Implementation of Pillar 2 tax proposal could result into revenue gains of up to 4 per cent of global corporate income tax (CIT), or $100 billion annually. In addition, $100 billion could be redistributed to market jurisdictions through Pillar 1 plans to ensure a fairer international tax framework.

Earlier in April, India had announced that all foreign billings for digital services provided in the country would attract a 2 per cent tax effective from April 1. Foreign billings are where companies take payment abroad for a service provided to customers in India. The tax would also apply to e-commerce transactions on websites such as, as well as advertising revenue earned from companies overseas if it eventually “targets a customer” in India.

In BRICS meeting, FM Sitharaman also talked about outcomes and initiatives of G20 Saudi Arabia in 2020 on the finance track and highlighted role of the five members in reflecting emerging economies concerns in these initiatives. She also presented India’s views on discussions related to infrastructure investments and New Developement Bank (NDB) membership expansion and emphasised the importance of regional balance. Business Today

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