OECD/G20 Inclusive Framework tax deal

Context:

• India joins OECD/G20 Inclusive Framework tax deal

OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting

• It is a solution for addressing the tax challenges arising from the digitalisation of the economy.
• It consists of two components-
  • Pillar One- reallocation of additional share of profit to the market jurisdictions and
  • Pillar Two -minimum tax and subject to tax rules.

Why India joined this tax deal?

• India’s has a greater share of profits in the markets
• consideration of demand side factors in profit allocation,
• to address the issue of cross border profit shifting and
• to stop treaty shopping
• needed a consensus solution that is simple to implement and comply.

About OECD:

• The Organisation for Economic Co-operation and Development is an intergovernmental economic organisation with 38 member countries.
• It was founded in 1961 to stimulate economic progress and world trade.
• OECD members are high-income economies with a very high Human Development Index (HDI) and are regarded as developed countries.
• India is not a member of OECD.

About G-20:

• It is a forum for finance ministers and central bank governors from nineteen of the world’s largest countries as well as the EU.
• Apart from the G7 countries, the G20 comprises Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, and Turkey.
• Together, the G20 countries make up around 80% of the world’s economy and two-thirds of the world’s population

https://pib.gov.in/PressReleasePage.aspx?PRID=1732150