India wants changed method to ascertain digital tax

To muster a larger share of tax from multinationals such as Google, Facebook, Amazon and Netflix, India is pushing for a major change at Organisation for Economic Cooperation and Development (OECD) on methodology at determining taxability in every jurisdiction. The organization, under its Base Erosion and Profit Shifting (BEPS) initiative, had recently said that if new tax regulations are formulated and adopted by all countries, income tax collections of major digital companies could go up by around US$ 100 billion.

“There are companies generating billions of dollars in revenue from India but manage to pay abysmal amount in taxes. All we want is that these companies cough up what’s only India’s fair share,” said an official who didn’t want to disclose his identity. He added that the government will soon submit its proposals to the OECD soon.

The body is currently contemplating which of the two models should be applied: taxing the company based on intellectual property registered in the country or based on the number of users. India supports the latter. Another thing that is in India’s favor is that OECD is also asking these companies to pay at least 12.5% tax in each country; as most companies merely pay about 6% (equalisation levy) on part of their revenues.