The Indian Minister of Finance and Corporate Affairs recently participated in the G20 Finance Ministers and Central Bank Governors meeting and associated events in Japan.
According to a press release, during the event, she highlighted the urgency to address the issue of determining the right nexus and profit allocation solutions to tax profits made by digital economy companies.
The minister made a case for the implementation of a “significant economic presence” concept for taxing global digital companies and close cooperation among the G20 member nations to deal with fugitive economic offenders who flee their countries to escape the consequences of law.
The Minister spoke about the fugitive economic offenders law passed by India which provides for denial of access to courts until the fugitive returns to the country. This law also provides for confiscation and selling of their properties.
Practices permitted by many jurisdictions that allow economic offenders to use investment-based-schemes to obtain residence or citizenship to escape from legal consequences need to be dealt with.
The significant economic presence concept has been piloted by India and supported by many countries, including the G24. She was confident that a consensus-based global solution, which should also be equitable and simple, would be reached by 2020.
The minister also talked about the commencement of the automatic exchange of financial account information (AEOI) on a global basis with almost 90 jurisdictions successfully exchanging information in 2018. This will ensure that tax evaders are not able to hide their offshore financial accounts from the tax administration.
She urged the G20 to further expand the network of automatic exchanges by identifying jurisdictions including developing countries and financial centres that are relevant but have not yet committed to any timeline. Appropriate action needs to be taken against non-compliant jurisdictions. For this, she pitched for the development of a common defensive toolkit of measures to deal with non-compliant tax jurisdictions that refuse to share tax-related information.
The Minister also highlighted the need for the G20 to monitor global current account imbalances to ensure that they do not result in excessive global volatility and tensions.
The global imbalances left a detrimental impact on the growth of emerging markets. Unilateral actions taken by some advanced economies adversely affect the exports and the inward flow of investments in these economies. She wondered if the accumulation of cash reserves by large companies indicated the reluctance of these companies to increase investments.
This reluctance could have adverse implications on growth and investments and possibly lead to a concentration of market power. She also urged the G20 to remain cognizant of fluctuations in the international oil market and study measures that can bring benefits to both oil exporting and importing countries.
