Tech giants will soon have to pay taxes to the country they operate from as G-20 nations have a plan in place to block the profit-shifting route to tax havens from next year.
Tech giants will soon have to pay taxes to the country they operate from as G-20 nations have a plan in place to block the profit-shifting route to tax havens from next year.
The G-20 endorsement of BEPS project, particularly Action Plan 1 relating to taxation of digital economy, will ultimately benefit emerging economies such as India in a big way.
Base erosion and profit shifting (BEPS) refers to tax planning strategies used by multinational enterprises that exploit gaps and mismatches in tax rules to avoid paying tax. The higher reliance on corporate income tax by developing countries means they suffer from BEPS disproportionately.
At present, many tech companies provide their services in countries such as India but choose to book sales in low-tax nations like Ireland.
About 40 per cent of multinational profits, mostly by tech giants, are shifted to tax havens globally each year. Economists Thomas Tørsløv, Ludvig Wier and Gabriel Zucman estimated that revenue loss from corporate tax globally is around 200 billion USD per year (approximately 10% of corporate tax revenue globally). Unofficial estimates put India’s tax evasion figures at up to 10 per cent of this total figure.
Source: India Today
