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India badly needs modern laws to tax digital giants: Experts
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SME Times News Bureau | 10 Oct, 2019
With the Organisation of Economic Co-operation and Development (OECD)
proposing an overhaul in the taxation system for digital companies,
cyber experts on Thursday urged the Indian government to speed up
necessary changes in domestic laws on internet taxation so that tech
giants like Google, Facebook and Amazon can be asked to shell out taxes
they have been evading for years.
The OECD on Wednesday published
a proposal to advance international negotiations to ensure large and
highly profitable multinational enterprises, including digital
companies, pay tax wherever they have significant consumer-facing
activities and generate their profits.
According to cyber
experts, given the fact that India is not yet a part of OECD, it is
imperative that India must be mindful of the way how things are
evolving.
"The Indian approach on the Internet taxation has left
much to be desired. India has not yet crystal clearly defined its
holistic national approach and perspectives on taxation on the
Internet," Pavan Duggal, the country's leading cyber law expert and
privacy advocate, told IANS.
However, it is essential that India
is mindful of the global developments that are taking place in this
regard and must come up with its own taxation approaches, which are in
sync with the global trends that are emerging.
"Further, India
needs to distinctly be walking in the path of ensuring that legal
entities who are offering their services via the internet in India,
whether they are physically present in India or not, would be subject to
Indian taxation," Duggal elaborated.
The new OECD proposal is
based on the work of the OECD/G20 Inclusive Framework on base erosion
and profit shifting (BEPS), which groups 134 countries and jurisdictions
on an equal footing, for multilateral negotiation of international tax
rules, making them fit for purpose for the global economy of the 21st
century.
"We're making real progress to address the tax
challenges arising from digitalisation of the economy, and to continue
advancing toward a consensus-based solution to overhaul the rules-based
international tax system by 2020," said OECD Secretary-General Angel
Gurria.
According to advocate Virag Gupta, in the K.N.
Govindacharya petition before Delhi High Court in 2012, taxation of
Internet companies was first raised when the government of India gave
"Double Tax Avoidance Agreement: as reason to not tax foreign Internet
companies.
The OECD proposal "may strengthen the case for
taxation where these companies are having huge business or presence. But
how can tax haven countries can be compelled to follow the OECD
guidelines?" Gupta told IANS.
Countries like China, France and
Germany have shown political will-power to tax Internet companies but
India has miserably failed to tax Internet giants despite being the
biggest market.
"India's Parliament is supreme and sovereign to
tax these companies for which necessary amendments are to be made in the
Income Tax Act, Companies Act and Information Technology (IT) Act etc,"
he suggested.
According to him, India was always free to tax these companies.
"In
this current economic slowdown, OECD decision may enable government to
bring new tax regime by which digital companies may be taxed," Gupta
added.
At the moment, the said OECD "Public Consultation
Document" is only indicative of the consultation process wherein
stakeholders have been asked to give their comments by November 12,
2019.
However, the approach could form the basis for subsequent
evolution of jurisprudence concerning taxation in the context of the
Internet.
"The fact remains is that today, most of the companies
offering services on the Internet are not paying their share of taxation
in different jurisdiction. This is despite them taking the benefit and
advantage of the markets of the said jurisdictions," informed Duggal.
"Further,
India needs to distinctly be walking in the path of ensuring that legal
entities who are offering their services via the internet in India,
whether they are physically present in India or not, would be subject to
Indian taxation," added Duggal, who is also a senior Supreme Court
advocate.
There are immense amount of challenges in this regard.
New
changes would be required in the existing Income Tax laws but more
significantly as a nation, "we need to make up our mind as to in what
manner, we want to contribute to the evolving taxation jurisprudence on
the Internet", Duggal emphasized.
"The top 15 Internet companies
alone have amassed a value of over Rs 20 lakh crore due to their Indian
users. The companies' value could be a major chunk of the Indian economy
but is serving no purpose to Indians," informed Gupta.
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