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FM calls for consensus on taxing digital firms like Google, Facebook

Some 129 countries are in talks to rework global tax system to make digital firms pay tax regardless of their physical presence or measured profits in a country

FM Sitharaman
Addressing the BRICS finance ministers and central bank governors on Monday, Sitharaman said a consensus solution will play an important role in ensuring fairness | Photo: PIB

Finance Minister Nirmala Sitharaman has called for evolving a consensus to resolve the vexatious issue of digital taxation. 

Addressing the BRICS finance ministers and central bank governors on Monday, Sitharaman said a consensus solution will play an important role in ensuring fairness, equity, and sustainability of tax systems.  “The finance minister also supported the expansion of the membership of New Development Bank (NDB) and emphasised the importance of regional balance," an official statement issued after the meeting said.

Brazil, Russia, India, China, South Africa, which make up for the BRICS group, are currently the members of the NDB.

The time frame to arrive at a consensus on taxing digital companies like Google, Facebook, and Netflix under OECD Base Erosion and Profit Shifting (BEPS) framework has now been pushed to mid-2021, from December. 

The OECD last month released a blueprint for the two pillars. India has sought feedback from the industry on the OECD’s Pillar-1 and Pillar-2 approaches. 

Pillar-1 deals with profit allocation by digital companies and which country has the right to tax them first. 

Pillar-2 proposes a mechanism to calculate tax per jurisdiction to be charged from the total profit pool, the report said.

As many as 129 countries of the Inclusive Framework under BEPS are in talks  to rework the traditional international tax system to make digital firms pay taxes regardless of their physical presence or measured profits in a country.

The finance minister observed that the Group of Twenty (G20), of which all BRICS countries are members, has delivered some very significant initiatives this year, including the G20 action plan in response to the Covid-19 pandemic, which has provided broad guidance to navigate a collective global response to the crises.