India Against G-7 Pact On Global Minimum Tax 'In-Principle'
The government's pushback on the global minimum tax comes ahead of a July meeting of G-20 Finance Ministers.
The Indian government is "in-principle" against a common global minimum tax rate, according to a senior official familiar with the matter.
Overnight, U.S. Treasury Secretary Janet Yellen spoke with Finance Minister Nirmala Sitharaman. In a statement, the U.S. Treasury Department said that "Secretary Yellen discussed that the United States and India have a shared interest in implementing a robust global minimum tax."
"The secretary stressed the importance of partnership with India in the G-20 and OECD to seize a once-in-a-generation opportunity to remake the international tax system to help the global economy thrive," the statement said.
Yellen and Sitharaman will interact again at the G-20 Finance Ministers and Central Bank Governors Meeting on July 9 and 10. Global tax reform is one of the key items on the agenda.
Earlier in June, Group of Seven rich nations agreed to back a new global minimum tax rate of at least 15% that companies would have to pay. This pact paves the way for levies on multinationals in countries where they make money, instead of just where they are headquartered and could help countries collect more taxes from big companies and enable governments to impose levies on the U.S. tech giants.
India does not want to abide by these restrictions, the person quoted above said, adding that India is a country which needs to attract investments.
India's lowest base corporate tax rate is still at 15% for new manufacturing companies and at a higher 22% for the rest.
Besides, India has already imposed a digital tax on revenues that is facing retaliatory tariff action by the U.S. Earlier in June, the U.S. imposed -- but immediately suspended the implementation of such retaliatory tariffs against six nations, including India. It did this to allow time for broader international negotiations on taxes, said the U.S. Trade Representative's office.
The G-7 proposal to tax multinational companies based on where digital sales occur may result in lower tax revenue for countries like India, which could prefer unilateral action. To be clear, the details of the main proposal are still being worked out.
India was a special invitee to the G-7 meeting that took place earlier this month.
The country's reluctance to support this pact comes ahead of the July meeting of G-20 finance ministers in Italy and long-running talks between about 140 countries at the Organization for Economic Cooperation and Development.