India is pushing countries to tax the profits of companies based on consumption of goods and not their physical presence, said Economic Affairs Secretary Subhash Chandra Garg.
The government has made several representations in this regard at fora of G20 countries, but the idea has been opposed by many nations, Garg said at an Annual International G20 Conference in Delhi today.
Garg said that since buyers or users of a sold good contribute to a company's profit, taxation should be based on significant consumption base, irrespective of how the goods and services are delivered.
He said that not all multinational companies earning revenue from India have a physical presence here, suggesting that taxation be linked to consumption. “For example, Netflix is beaming so much of entertainment content into India, it may not have even a single small office here.”
Yet, he said that a lot of countries “on the other side” feel that the “old-nexus rule” will benefit them and help their companies keep profits with them. “But that's not necessarily right and that's not necessarily in the interest of the consuming countries.”
With the introduction of goods and services tax, India has moved towards destination-based taxation, Garg, demanding that profits be taxed based on the principle of destination. India, he said, would take up this agenda further to restore balance in the global taxation system.
India had introduced equalisation levy three years ago to tax online and digital advertisements that would indirectly tax platforms like Google Inc. and Facebook Inc.
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