INDIA: Nirmala Sitharaman urges G20 to work on sharing of non-financial asset data.

As published on livemint.com, Friday 15 July, 2022.

Finance minister Nirmala Sitharaman on Thursday urged the G20 leaders to put in place a framework for automatic exchange of information on non-financial assets to check tax evasion and to ensure that the proposed global framework on digital economy taxation protects developing country interests.

Speaking at the G20 ministerial tax symposium in Bali, Sitharaman said that automatic sharing of information on non-financial assets among countries was important in checking tax evasion given that tax evaders set up different layers of subsidiaries for parking unaccounted wealth in non-financial assets in offshore jurisdictions.

Sitharaman said investigations have shown that numerous layers of entities are often set up by tax evaders to conceal their unaccounted assets. While the existing automatic exchange of information framework provides for financial account information sharing among various jurisdictions, tax evaders explore other avenues to shift their unaccounted wealth through investment in non-financial assets, the minister said. The minister urged the G20 to take this up as an action point.

“While the development of crypto asset reporting framework is underway, I call upon the G20 to examine feasibility of automatic exchange of information in respect of other non-financial assets beyond those covered under the common reporting standard (on automatic exchange of information), like immovable properties as well," the minister said.

Sitharaman also urged G20 to bring countries which are currently not part of automatic exchange of information into this system for the sake of tax transparency. The minister said that while over 100 countries have committed to exchanging financial account information under the common reporting standards, there are some jurisdictions which are yet to commence exchange of information under this framework. This system, the minister said, can strengthen the global effort against offshore tax evasion and avoidance.

On the proposed global tax framework comprising a new regime for digital economy taxation and a global minimum corporate tax rate of 15% that are currently being debated by G20 and OECD nations, Sitharaman said there is a need to ensure that developing countries are able to effectively participate in the negotiations.

“I call on the G20 inclusive framework to support the active participation of all members in the finalisation of the technical aspects of the two-pillar solution (digital economy taxation regime and a 15% minimum corporate tax plan), so that we can ensure a fairer, a sustainable and inclusive tax system which results in meaningful revenue for the developing countries," Sitharaman said.

The minister’s suggestion about meaningful revenue for developing nations is significant because the current proposals on digital economy taxation could fetch lesser revenue to India than what the country currently collects by way of equalisation levy on digital economy services.

“In the development of these rules, the concerns of the developing countries must be addressed," the minister said, explaining that the inputs of developing countries need to be included in the formula as it affects them.

The digital economy tax framework proposes to allow taxation rights to countries like India which are markets for global tech giants without a physical presence. India wants the rules to be equitable.

OECD secretary general Mathias Cormann, who also spoke on the occasion, said that while progress on the proposed global tax deal has been made, there are still issues to be ironed out.

“While we have seen solid progress, challenges do remain to make sure that all members of the inclusive framework can advance together," said Cormann. As per media reports, Hungary has resisted the global minimum tax deal.

“We all understand the importance to ensure that international tax arrangements are efficient, effective and fair and we understand the importance of working closely on an equal footing by all countries including by developing countries in reforming international tax arrangements," said Cormann.

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