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Last Updated : Oct 10, 2019 08:16 PM IST | Source: Moneycontrol.com

OECD proposes changes in global corporate taxation rules to bring e-commerce cos under ambit

The subject of how to tax the digital economy and the relevance of the existing global tax rules has long been a concern.

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(Image: Facebook)
(Image: Facebook)

The Organisation for Economic Cooperation and Development (OECD) has proposed changes in the existing global taxation norms, a move that could shake-up  e-commerce and tech giants across the world.

The subject of how to tax the digital economy and the relevance of the existing global tax rules has long been a concern.

There have been issues wherein digital companies, especially tech giants and leading e-commerce players around the world, have dodged taxation by shifting their profits between countries. What such companies essentially do is they shift the "source" of their income or profits to countries with low tax rates.

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In this context, the OECD has proposed an overhaul and expansion of the rights vested in governments to tax multinational companies that have significant market presence there.

This would mean higher tax to be paid by digital companies around the world, especially major players like Amazon, Google and Netflix.

"In a digital age, the allocation of taxing rights can no longer be exclusively

circumscribed by reference to physical presence. The current rules dating back to the 1920s are no longer sufficient to ensure a fair allocation of taxing rights in an increasingly globalised world," the OECD said in its proposal.

At present, if a company does not have some form of physical presence in a jurisdiction, it is not liable to pay taxes on its business profits there. This, however, becomes problematic in an increasingly digitalised global world economy. Companies can now do business ion any jurisdiction without having physical presence there.

This is what the OECD proposal seeks to address. It would, if implemented, allow countries to tax profits of MNCs that have a significant involvement in their economy, even if those companies does not have any physical presence in those countries.

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First Published on Oct 10, 2019 08:16 pm
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