© Reuters. FILE PHOTO: Workers work to install a hoarding board near the venue of G20 Finance Ministers and Central Bank Governors meeting at Gandhinagar in Gujarat, India July 13, 2023. REUTERS/Amit Dave/File Photo
By Shivangi Acharya, Sarita Chaganti Singh and Nikunj Ohri
NEW DELHI (Reuters) – India will push its Group of 20 partners at a meeting it is hosting to support its proposal to raise the share of taxes multinational companies pay to countries where they earn “excess profits”, government officials said.
India’s proposal, which has not been previously reported, could temper optimism among G20 members such as Australia and Japan that the meeting of finance ministers and central bankers in Gujarat would make progress on a long-awaited overhaul of global corporate taxation.
More than 140 countries were supposed to start implementing next year a 2021 deal overhauling decades-old rules on how governments tax multinationals. The present rules are widely considered outdated as digital giants like Apple (NASDAQ:AAPL) or Amazon (NASDAQ:AMZN) can book profits in low-tax countries.
The deal, pushed by the U.S., would levy a minimum 15% tax on large global firms, plus an additional 25% tax on “excess profits”, as defined by the Organisation for Economic Cooperation and Development (OECD).
But several countries have concerns about the multilateral treaty underpinning a major element of the plan, and some analysts say the overhaul is at risk of collapse.
“India has made suggestions to get its due share of taxing rights on excess profits of multinational companies,” one official said. The suggestions have been made to the OECD and will be discussed “extensively” during the G20 meeting on Monday and Tuesday, the official said.
Three officials, who asked not to be named as discussions with the OECD were ongoing and the G20 meeting had not begun, said India wants significant increases in the tax paid in countries where the firms do business. They did not specify how much India is seeking.
India’s finance and external affairs ministries and the OECD did not respond to requests for comment.
Under the agreement, global corporations with annual revenues over 20 billion euros ($22 billion) are considered to be making excess profits if the profits exceed 10% annual growth. The 25% surcharge on these excess profits is to be divided among countries.
India, fighting for a higher share of taxes for markets where firms do business, is the world’s most populous country and set to become one of the biggest consumer markets. Indian people’s average income is set to grow more than 13-fold to $27,000 by the end of 2047, according to a survey by the People’s Research on India’s Consumer Economy.
The G20 host nation will also propose that withholding taxation be de-linked from the excess profit tax principle. The rules now say countries offset their share of taxes with the withholding tax they collect.
Withholding tax is collected by companies while making payments to vendors and employees, and remitted to tax authorities.
The OECD in a document issued on Wednesday said a few jurisdictions have expressed concerns over allocating taxing rights among countries.
“Efforts to resolve these issues are underway with a view to prepare the Multilateral Convention for signature expeditiously,” it said.
($1 = 82.0490 Indian rupees)
($1 = 0.8907 euros)