With An Eye On Big Tech, FM Sitharaman Seeks Global Cooperation For Responsible Taxation

Raising questions over the way big tech companies pay taxes, Finance Minister Nirmala Sitharaman has called for global cooperation to create a responsible financial ecosystem.

Speaking at the Global Fintech Fest 2023, Sitharaman noted that big tech companies are earning in one country and paying taxes elsewhere. 

“When technology-driven companies are not brooking any physical borders, money is being made from one territory, but they are registered elsewhere. So how does taxation work? Does the country from where the revenues are generated benefit from it?” she asked.

The finance minister said that India, under its G20 presidency, is discussing the two-pillar tax solutions. “Using this opportunity of India’s G20 presidency, (Indian government) is talking about global cooperation and global collaboration for having a responsible financial ecosystem which will be doing justice for inclusion and resilience and sustainability.”

She also called for global cooperation to address challenges like tax evasion, crypto-related threats, cyber threats, drug menace and round-tipping of resources.

This is not the first time the Indian government has highlighted the alleged tax evasion by foreign-headquartered big tech companies. 

Last year, multiple companies, including Xiaomi, OPPO and Vivo, came under the government’s radar for alleged tax evasion. “The government is looking into cases of alleged tax evasion by three mobile companies of China”, Sitharaman said last year. 

The three companies have been alleged to have transferred revenues earned in India to offshore entities as payments towards royalty and licence fees to drive their net income down and reduce the tax liability in India.

Tech giants like Apple and Google have also been frequently accused of reducing their actual tax liability in various countries. Apple, for instance, is embroiled in a legal tussle with the European Union over the company’s tax arrangements with Ireland, which saw Apple pay zero corporate tax in the EU over a 10-year period.

Currently, Amazon Web Services is also engaged in a legal tussle against Indian authorities over an INR 549 Cr tax demand.

According to a 2021 report by the campaign group Fair Tax Foundation, Amazon, Facebook (now Meta), Google’s parent Alphabet, Netflix, Apple and Microsoft paid $96 Bn less in tax between 2011 and 2020 than the notional taxation figures cited in their annual financial reports.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.