New Delhi, Feb 4 (PTI): India is set to re-evaluate its position on joining the OECD's global tax deal after the United States withdrew from the pact, rendering its implementation "impractical," according to Finance Secretary Tuhin Kanta Pandey.
On January 20, US President Donald Trump issued a presidential memorandum declaring that the Global Tax Deal would "have no force or effect within the United States." This decision effectively nullified years of progress by the Organisation for Economic Cooperation and Development (OECD) in uniting 140 nations to implement a minimum 15% corporate tax on multinational firms.
Addressing the uncertainty surrounding India's stance on the deal, Pandey emphasized that the US exit raises significant concerns, stating that the pact is unlikely to function without the participation of the United States.
"The tax deal is a multilateral approach where the US plays an integral role. If the US has decided to walk away, implementing the entire framework becomes impractical," Pandey said during a post-Budget discussion hosted by Assocham. He added that while India had previously expressed reservations, it had largely aligned with the consensus.
"We have not enacted any legislative measures, unlike some other nations. If the US withdraws from the process, we will need to assess the benefits before making any commitments," he noted.
With the US backing out, India’s next move will be crucial in determining the future viability of the global tax framework. The government will now weigh its options carefully before deciding on its course of action.
On January 20, US President Donald Trump issued a presidential memorandum declaring that the Global Tax Deal would "have no force or effect within the United States." This decision effectively nullified years of progress by the Organisation for Economic Cooperation and Development (OECD) in uniting 140 nations to implement a minimum 15% corporate tax on multinational firms.
Addressing the uncertainty surrounding India's stance on the deal, Pandey emphasized that the US exit raises significant concerns, stating that the pact is unlikely to function without the participation of the United States.
"The tax deal is a multilateral approach where the US plays an integral role. If the US has decided to walk away, implementing the entire framework becomes impractical," Pandey said during a post-Budget discussion hosted by Assocham. He added that while India had previously expressed reservations, it had largely aligned with the consensus.
"We have not enacted any legislative measures, unlike some other nations. If the US withdraws from the process, we will need to assess the benefits before making any commitments," he noted.
Global Tax Deal at Crossroads
The OECD's two-pillar global tax deal, signed by nearly 140 countries in 2021, was designed to tackle tax avoidance by multinational corporations.- Pillar 1 aims to redistribute a portion of the profits of large multinational corporations to the countries where they generate revenue.
- Pillar 2 establishes a 15% global minimum corporate tax rate to prevent tax base erosion.
US Concerns Over the Tax Deal
One of the key reasons behind the US withdrawal is the concern that American companies could be subjected to double taxation on the same income. Additionally, the new OECD tax rules might alter how corporate taxes are calculated, potentially increasing financial burdens on US businesses operating abroad.With the US backing out, India’s next move will be crucial in determining the future viability of the global tax framework. The government will now weigh its options carefully before deciding on its course of action.
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