India delays signing global tax deal until concerns are addressed: Official

Global Tax deal: India will not sign the global corporate tax deal, which targets highly profitable multinational firms, until its concerns on dispute resolution and withholding tax treatment are addressed, a finance ministry official announced on Thursday. The "Pillar 1" arrangement, part of a 2021 global two-part tax deal, aims to replace unilateral digital services taxes (DSTs) with a new mechanism to share taxing rights on multinational companies like Google's Alphabet, Amazon, and Apple.

Revenue Secretary Sanjay Malhotra stated that India is "constructively engaging" with all countries to successfully conclude "Pillar 1" and hopes the deal will be finalised soon. However, he emphasised that this cannot be done at the cost of India's interests. "Unless our suggestions are accepted and we get a reasonable solution which is acceptable to us, we cannot agree to the formulation," Malhotra told Reuters.

US Treasury Secretary Janet Yellen accused India in May of refusing to engage on issues important to US interests, noting that negotiations were stalled. Among other issues, India does not want any tax-related disputes to be subject to international arbitration.

As a conciliatory measure, India proposed to remove a 2 percent equalisation duty on digital service providers, which would cost the Indian government about 25 billion rupees ($300 million) annually. Despite ongoing talks extending beyond a June 30 deadline, governments are now looking to the Group of 20 finance leaders' meeting in Brazil for progress.

The stakes are high as failure to reach an agreement on final terms could prompt several countries to reinstate their taxes on US tech giants, risking punitive duties on billions of dollars in exports to the US Many countries are already implementing Pillar 2, which sets a global minimum tax of 15 percent on multinationals, although it has not yet been ratified by the US Regarding Pillar 2, Malhotra mentioned that India has set up a panel to frame rules for its implementation.

With Reuters Inputs