India attends G20 finance and banking meet

Union Minister for Finance and Corporate Affairs, Nirmala Sitharaman, led the Indian delegation at the G20 Finance Ministers and Central Bank Governors meeting over June 8-9 at Fukuoka, Japan

June 10, 2019

The Indian delegation brought up the urgent need to fix the issue of determining right nexus and profit allocation solution for taxing the profits earned by digital economy companies

Ms Sitharaman noted that the measures around tax challenges arising from the digitalisation of economy was entering a critical phase with an update to the G20, expected next year

Ms Sitharaman supported a solution based on the concept of ‘significant economic presence’ of businesses taking into account their sustained interaction with the economy of a country

Ms Sitharaman welcomed the commencement of automatic exchange of financial information (AEOI) on a global basis with nearly 90 jurisdictions exchanging information in 2018

India’s union minister for Finance and Corporate Affairs, Nirmala Sitharaman, led the Indian delegation at the G20 Finance Ministers and Central Bank Governors conference over June 8-9 at Fukuoka, Japan. The Indian delegation, which included Subhash C Garg, finance secretary and secretary economic affairs, and Viral Acharya, deputy governor of RBI, among other officers, brought up the urgent need to fix the issue of determining right nexus and profit allocation solution for taxing the profits earned by digital economy companies. At the meeting, Ms Sitharaman noted that the measures around tax challenges arising from the digitalisation of the economy were entering a critical phase with an update to the G20, due next year.

Ms Sitharaman supported the potential solution based on the concept of ‘significant economic presence’ of businesses taking into account their sustained interaction with the economy of a country. This concept has been piloted by India and supported by a large number of countries, including the G-24. She expressed confidence that a consensus-based global solution, which should also be equitable and simple, would be reached by 2020. Ms Sitharaman also welcomed the commencement of automatic exchange of financial account information (AEOI) on a global basis with nearly 90 jurisdictions exchanging information in 2018. This would ensure that tax evaders could no more hide their offshore financial accounts from regulators.

At the meeting, Ms Sitharaman urged the global forum to 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. She also called upon the international community to agree on a toolkit of defensive measures, which can be taken against such non-compliant jurisdictions. Earlier, the finance minister participated in the ministerial symposium on international taxation and spoke in the session on the ongoing global efforts to counter tax avoidance and evasion. At the session, she spoke on the tax challenges for addressing digitalisation of the economy, emphasising that nexus was important.