India To Evaluate Benefits Of OECD’s Global Tax Deal Post Us Walkout

New Delhi: India will evaluate the benefit of joining the OECD’s global tax deal as the US deciding to withdraw from such a global pact has made it “impractical to implement”, Finance Secretary Tuhin Kanta Pandey said on Tuesday.

US President Donald Trump on January 20 in a Presidential memorandum had said that the “Global Tax Deal have no force or effect within the United States”, thus nullifying the progress made so far by the Organisation for Economic Cooperation and Development (OECD) to bring 140 countries on the same platform to levy a minimum 15 per cent tax on profits of multinational corporates.

To a question on what would be India’s stand on the global tax pact, Pandey said the US exit has added a lot of uncertainty and if the United States is not joining it then such a pact doesn’t work out. Pandey, in a post-Budget interaction of Assocham, said the tax deal is a multilateral approach where the US is much integrally needed. “If the US has now said that it is walking out of it, then obviously it would be impractical to implement the whole thing. We had some reservations already recorded, but we had broadly gone along with the consensus with some reservations.

“We have not enacted any legislative measures. Some countries have already... If the US withdraws from this process, then I think we will have to evaluate what benefit it will have,” Pandey told reporters here. In 2021, nearly 140 countries signed the OECD’s global tax deal. The two-pillar solution aimed to address the “race to the bottom” approach of global tax competition and discourage cross-border tax avoidance by firms.

Pillar 1 aims to reallocate the residual profits of large multinationals from their home countries to jurisdictions where they generate revenue, and Pillar 2 establishes a 15 per cent global minimum corporate tax.

Around 50 jurisdictions have already adopted or made significant strides towards adoption of GloBE rules. These jurisdictions will have to now undertake a course correction to adjust to the new realities.