India likely to push G20 to raise share of taxes on MNCs where they earn 'excess profits': Report

India is planning to push G20 nations to support its proposal to raise the share of taxes multinational companies pay to countries where they earn “excess profits”, Reuters reported on Sunday. India wants a significant increase in the tax paid in countries where firms do business but did not specify the exact amount India was seeking, the report said citing some officials.

An official said: "India has made suggestions to get its due share of taxing rights on excess profits of multinational companies." These suggestions have been made to the Organisation for Economic Cooperation and Development (OECD) and will be discussed “extensively” during the G20 meeting on Monday and Tuesday, as per the official.  

The G20 host will also likely propose that withholding taxation should be de-linked from the excess profit tax principle. Withholding tax is collected by companies while making payments to vendors and employees, and remitted to tax authorities. These rules say countries offset their share of taxes with the withholding tax they collect.  

India’s proposal could dampen optimism among G20 members like Australia and Japan. G20 members such as Australia and Japan are hopeful that the meeting of finance ministers and central bankers in Gujarat would make progress on the long-awaited overhaul of global corporate taxation.

Over 140 nations were supposed to start implementing a 2021 deal that overhauled decades-old rules on how MNCs are taxed by the governments. This deal, pushed by the US, would impose a minimum 15 per cent tax on large global firms and an additional 25 per cent tax on “excess profits”, as per the OECD.  

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 per cent annual growth. The 25 per cent surcharge on these excess profits is to be divided among countries.  

Present rules are considered outdated since tech megaliths like Apple and Amazon can indulge in profit booking in low-tax countries. The OECD had recently said a few jurisdictions have expressed concerns over allocating tax rights among countries. 

(With Reuters inputs)

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