India will stop imposing ‘Google tax’ on Facebook, Netflix, and more as part of global deal
India gets about Rs 4,000 crore through equalization levy on multinational tech firms like Facebook, Amazon, Apple, Google, and Netflix, but it will have to be withdrawn as part of the global tax deal finalized by the OECD.
India will abolish the equalisation levy or ‘Google Tax’ imposed on internet companies after representatives of 136 countries agreed to a global tax deal to ensure that digital companies such as Google, Facebook, Netflix, and Microsoft pay a minimum rate of 15% where they operate.
India gets about Rs 4,000 crore through equalisation levy, which will have to be withdrawn as part of the global tax deal finalised by the Organisation for Economic Co-operation and Development (OECD) on Friday. The new regime is expected to come into effect only by 2023-24 after the final details are thrashed out.
The equalisation levy of 2-6% is imposed on the turnover of companies such as those cited above that otherwise do not pay taxes in India. “We will withdraw it only after the new tax regime comes into effect,” a senior government official told ET. India has also opposed a move by some developed countries such as the US to provide credit in lieu of equalisation levy till the new tax regime comes into effect.
India has also opposed the move by developed countries for immediate removal of equalisation levy or providing credit to the companies in lieu of the same. Government officials quoted in an Economic Times report said the country will not let go off revenues till the time contours of the deal are finalised. The new global tax regimes is expected to be hammered into implemented by 2023-34.
On Friday, OECD tied up several loose ends by finalising two-pillar solutions and laying a roadmap. It said there is an expected increase in additional tax revenues to the extent around $ 150 billion annually arising out of this deal.
Countries are aiming to sign a multilateral convention during 2022, with effective implementation in 2023, it said. The convention will be a vehicle for implementation of the newly agreed taxing right under Pillar One, as well as for the removal provisions with respect to unilateral measures like Digital Service Taxes.
However, there could be more discussions on the proposed global tax structure as the threshold for levying the global tax is still quite high.
