India won’t make sovereign commitment on future digital services tax

Source: The post is based on the article “India won’t make sovereign commitment on future digital services tax” published in Business Standard on 18th August 2022.

What is the News?

In a move that could delay the implementation of a Global Tax Deal, India and other developing countries under the G24 grouping have objected to the proposal of making sovereign commitments to not introduce any future digital services tax like an equalisation levy. 

What is the Global Tax Deal?

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What are developing countries’ objections to the deal?

On Digital Services Taxes: Under Pillar One of the deal, all signing countries are required to withdraw their existing digital services taxes and other unilateral measures with respect to all companies and also commit not to introduce any new unilateral measures in the interim period.

– However, India and other developing countries have objected to the proposal of making sovereign commitments to not introduce any future digital services tax like an equalisation levy. 

– The developing countries are of the view that any commitment to not enact future measures should be in the nature of political commitments only.

Outsourcing Audit Functions: G24 countries including India have raised objections to outsource audit functions to independent experts in the proposed dispute resolution panel. 

– They pointed out that panels are expected to be privy to very sensitive non-public information of the largest and most profitable companies in the world. Further, the group is concerned about the confidentiality, impartiality and conflict of interest of such independent experts.

What is G24?

G-24 was established in 1971 by the Group of 77(G-77) as one of its Chapters.

Mandate: To help coordinate the positions of developing countries on international monetary and development finance issues as well as to ensure that their interests are adequately represented in negotiations on international monetary matters.

Secretariat: It is based in Washington D.C. in the IMF Headquarters.