Impact of Global Minimum Tax Rate

Impact of Global Minimum Tax Rate

Tags:      Gig Economy     Economy     WTO     WTO Public Stockholding     MSP     Economic Growth     Masala Bond     Environmental Performance Index     Forecast of Economic Growth     Functions of the Finance Commission

The proposal for a global minimum tax rate has far-reaching implications for countries worldwide, including India. The global minimum tax rate, if implemented, would establish a minimum threshold for taxation across countries. This means that multinational corporations operating in India would be required to pay taxes based on a predetermined minimum rate, regardless of the tax rate prevailing in their home countries. The Global Minimum Tax Rate as per the Income Tax Act would need to be updated to incorporate this global minimum tax rate, ensuring its enforcement and compliance.

The Global Minimum Tax impact on India would be manifold. Firstly, it would prevent profit shifting and base erosion by multinational corporations. This would help address the challenges faced by India in collecting taxes from foreign companies and ensure that they contribute their fair share to the Indian economy. Secondly, the global minimum tax rate could lead to increased tax revenues for India. By establishing a minimum threshold, India would be able to generate additional tax income from multinational corporations that have been utilizing tax avoidance strategies. This would enhance India's fiscal position and provide additional resources for development initiatives, infrastructure projects, and social welfare programs.

One proposal under discussion is the idea of implementing a quarterly global minimum tax rate. Global Minimum Tax Rate quarterly would require multinational corporations to calculate and pay their global minimum tax liabilities every quarter. This would ensure more frequent and timely tax payments, minimizing the risk of tax evasion or delay in payments. The introduction of a quarterly global minimum tax rate would enhance transparency and allow for better monitoring and enforcement of tax obligations. It would provide a more accurate assessment of a company's tax liability throughout the year, facilitating better tax planning and reducing the potential for manipulation or avoidance.

Global Minimum Tax Rate Limit: The concept of a global minimum tax rate limit refers to the maximum threshold set for the global minimum tax rate. This limit would ensure that the minimum tax rate does not exceed a certain predetermined level. The establishment of a limit prevents excessive tax burdens on multinational corporations and provides clarity and certainty regarding their tax obligations. The global minimum tax rate limit would strike a balance between preventing tax avoidance and ensuring that taxation remains reasonable and fair.