India Sunday called on G-20 countries to adopt principle of ‘significant economic presence’ while addressing challenges to tax profits made by the digital companies.
Addressing the two-day meeting of the G-20 finance ministers and central bank governors in Fukuoka, Japan, Finance Minister Nirmala Sitharaman noted the urgency to fix the issue of determining right nexus and profit allocation solution for taxing the profits made by digital economy companies.
“FM (Finance Minister) noted 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.
“In this respect, the FM 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,” a finance ministry statement said.
Sitharaman expressed confidence that a consensus-based global solution, which should also be equitable and simple, would be reached by 2020.
The minister said that with almost 90 jurisdictions now adopting the automatic exchange of financial account information (AEOI), it would ensure that tax evaders could no more hide their offshore financial accounts from the tax administration.
“She urged the G20/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. In this respect, she called upon the international community to agree on a toolkit of defensive measures, which can be taken against such non-compliant jurisdictions,” the statement said.