India’s Stance on Global Corporate Tax Deal: Concerns over Dispute Resolution and Withholding Tax

India will not sign the global corporate tax deal focused on highly profitable multinational firms unless its concerns about dispute resolution and the treatment of withholding tax are addressed, a finance ministry official said on Thursday.

Pillar 1 Arrangement: This arrangement is part of the 2021 global two-part tax deal, designed to replace unilateral digital services taxes (DSTs). It introduces a new mechanism for sharing taxing rights on multinational companies, such as Alphabet’s Google, Amazon, and Apple.

Indian Proposal: As a compromise, India has proposed to eliminate a 2% equalization duty on digital service providers. This move would result in a loss of approximately 25 billion rupees ($300 million) annually for the Indian government.

Pillar 2 Implementation: Many countries have started implementing Pillar 2, which establishes a global minimum tax rate of 15% on multinationals. However, it has not yet been ratified by the United States.

India’s Actions on Pillar 2: India has formed a panel to develop rules for implementing Pillar 2.