Will India benefit from G7 deal on global minimum 15% corporate tax? Here’s what experts have to say

The G7 nations, comprising the US, UK, Germany, France, Canada, Italy and Japan, agreed to support a global minimum corporate tax rate of at least 15 per cent on large firms in each country they operate.

India is likely to benefit from the pact agreed by Group of Seven (G7) advanced economies on the global taxation system, according to tax experts. The finance ministers and central bank governors of the G7 countries met in London for two days and reached a landmark deal to deter multinational companies from avoiding taxes by stashing profits in low-rate countries.

The finance ministers and central bank governors of the G7 countries met in London for two days of talks. (AP)

The G7 nations, comprising the US, the UK, Germany, France, Canada, Italy and Japan, agreed to support a global minimum corporate tax rate of at least 15 per cent on large firms in each country they operate, which, according to the UK, will help create a more “level playing field and cracking down on tax avoidance.” They also agreed to reforms that will see multinationals paying tax in the countries where they do business, a move aimed at plugging loopholes in cross-border taxation.

Experts suggest that India's effective tax rate is still above the global minimum tax rate, which would not impact companies doing business in India. Nangia Andersen India chairperson Rakesh Nangia highlighted that India attracts foreign investment owing to its large internal market, quality labour at competitive rates, strategic location for exports, and a thriving private sector, according to news agency PTI.

Consulting firm AKM Global tax partner Amit Maheshwari said India is expected to benefit from the major G7 deal as it is a big market for a large number of tech companies, reported PTI. "It remains to be seen how the allocation would be between market countries. Also, the global minimum tax of at least 15 per cent means that in all probability the concessional Indian tax regime would still work, and India would continue to attract investment," Maheshwari was quoted as saying by PTI.

EY India national tax leader Sudhir Kapadia said the support for a global minimum corporate tax rate is a path-breaking, especially for large and developing countries like India which would always find it very difficult to keep corporate tax rates artificially lower in a bid to increase much needed foreign direct investments in the country.

"Even the recently announced lower rate of 15 per cent for new manufacturing units in India just about meets this new threshold, thus, not affecting this much-needed boost to manufacturing in India. Equally important is the explicit granting of taxing rights to 'market countries' for a share of global profits of multinational corporations, thus aligning right to taxation with the place of economic contribution," Kapadia added.

(With PTI inputs)