Thursday, May 30, 2024

Google, Facebook face huge tax liability as OECD defers common tax frame

After the Organisation for Economic Co-operation and Development (OECD) decided to postpone its common tax frame, global digital giants including Google, Facebook, LinkedIn, and Netflix could face huge tax liability.

OECD was expected to come with a common tax framework that will allow countries like India to implement their tax plans rather than waiting for other frameworks to tax these digital giants.

OECD’s framework, which was going to be implemented in December, would have created a common consensus on how the companies would be taxed but now it has been postponed till mid-next-year.

One of the close sources from the government said to Times Now: “India was only waiting for the OECD to give some guidance around how economies must tax these global giants. Now that no consensus seems to be emerging, most large economies would go ahead with their domestic taxes and regulations,

 India has mentioned it earlier also how global digital companies, even after having a large consumer base, are not paying enough taxes and OCED’s framework will bring digital giants under the ambit of local taxes.

If we take India for instance, according to government officials the digital giants earn as much as Rs. 25,000 crores from India but they do not pay domestic tax and only pay a portion of the amount.

Since last year, India has already started partly taxing these global giants and has introduced a Significant Economic Presence (SEP) framework.

According to these SEPs government can tax digital companies in India even if they don’t have a permanent establishment (PE) here.PE is a concept in taxation that decides where a company must pay taxes. India’s move essentially means companies that do not have a single employee or office in the country too can be taxed by the income tax department here.

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