India's Finance Minister Nirmala Sitharaman called for global cooperation and collaboration to address challenges such as tax evasion, crypto threats, cyber threats, drug menace, and round-tripping of resources, while delivering the inaugural address at the Global Fintech Fest 2023 on September 6.
Elaborating on the tax evasion issue, Sitharaman explained companies are making money in one country but are 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.
In India, many startups have moved their headquarters abroad because of favourable business and regulatory regimes, ease of doing business, tax incentives, etc. This is known as flipping. The government is not in favour of flipping because it leads to a brain drain of entrepreneurial talent from India and a loss of intellectual property and tax revenue for the country.
An expert committee recently proposed measures to reverse flipping and bring startups back to India. Globally, big tech companies have also been criticised for tax evasion. For example, Apple was criticised for not paying its fair share of taxes in the US by registering itself in Ireland, which is a very low rate of tax for companies. The same goes for Google, Microsoft, and Meta, who all have registered in different tax-friendly countries.
Sitharaman told the gathering that India, under its G20 presidency, is discussing the two-pillar tax…