NEW DELHI: India will reconsider its stance on joining the OECD’s global tax deal after the US withdrawal effectively derailed the agreement, Finance Secretary Tuhin Kanta Pandey said on Tuesday.
The absence of US participation in the OECD’s global tax deal raises significant uncertainty, making it impractical to implement the pact aimed at imposing a 15 per cent global minimum tax on multinational corporations.
US President Donald Trump, in a memorandum issued on January 20, declared that the “Global Tax Deal has no force or effect within the United States,” nullifying efforts by the OECD to align 140 countries under a uniform taxation framework.
Pandey, speaking at a post-Budget interaction with Assocham, emphasised that the multilateral nature of the tax deal makes US participation crucial.
Reservations
“If the US has now said that it is walking out, then obviously it would be impractical to implement the whole thing. We had some reservations already, but we broadly went along with the consensus. Now, if the US withdraws, we will have to evaluate what benefit it will have,” he said.
The OECD’s global tax deal, the two-pillar framework, was designed to address global tax competition and curb cross-border tax avoidance.
Pillar 1 sought to reallocate residual profits of large multinationals to the markets where they generate revenue, while Pillar 2 established a 15 per cent minimum corporate tax rate.
With nearly 50 jurisdictions having already adopted or progressed towards implementing these rules, the US withdrawal has forced a reassessment of the pact’s viability. Concerns in the US included the risk of double taxation for American firms and potential conflicts between domestic tax policies and the global framework.
India, which had yet to enact legislative measures for the deal, will now weigh the implications of the US exit before deciding on its next steps on OECD’s global tax deal.
