New Delhi, June 10: Appreciating the significant progress made under the taxation agenda including the Base Erosion and Profit Shifitng, Finance Minister Nirmala Sitharaman noted the urgency to fix issue of determining right nexus and profit allocation solution for taxing the profits made by digital economy companies. She was talking at the G20 Finance Minister’s meeting at Japan.
Accompanied by Subhash C. Garg, Finance Secretary and other officers, Sitharaman also stressed that the work on tax challenges arising from the digitalisation of economy is entering a critical phase with an update to the G20, due next year.
She strongly supported the potential solution based on the concept of significant economic presence of businesses taking into account the evidence of their purposeful and sustained interaction with the economy of a country. This concept has been piloted by India and supported by large number of countries including the G-24.
Further welcoming the commencement of automatic exchange of financial account information (AEOI) on a global basis with almost 90 jurisdictions successfully exchanging information in 2018, she ensured that tax evaders could no more hide their offshore financial accounts from the tax administration.
Meanwhile, she also urged the Global Forum to further expand the network of automatic exchanges by identifying jurisdictions including developing countries and financial centers that are relevant but have not yet committed to any timeline. “Appropriate action needs to be taken against non-compliant jurisdictions”, she said calling upon the international community to agree on a toolkit of defensive measures.
Sitharaman also raised the need for international cooperation on dealing with fugitive economic offenders who flee their countries to escape from the consequences of law. She informed about the fugitive economic offenders law passed by India which provides for denial of access to courts until the fugitive returns to the country.
“This law also provides for confiscation of their properties and selling them off”, she highlighted drawing the forum’s attention to the practice permitted by many jurisdictions, which allow economic offenders to use investment-based schemes to obtain residence or citizenship to escape from legal consequences and underlined the need to deal with such practices.
Sitharaman highlighted the need for the G20 to keep a close watch on global current account imbalances to ensure that they do not result in excessive global volatility and tensions. The global imbalances left a detrimental impact on the growth of emerging markets. Unilateral actions taken by some advanced economies adversely affect the exports and the inward flow of investments in these economies.
On the sidelines of the G20 meet, India held bilateral meeting with Phillip Hammod, Chancellor of United Kingdom and discussed efforts undertaken by both sides for closer collaboration in several areas, viewing to enhance cooperation in tax matters ahead.