Global investors need Indian tax carrots and not uncertainty sticks

India can expect a global tax reform pact to work in its favour and should make tax certainty a top domestic policy priority

- Pascal Saint-Amans

Nearly two years ago, in a bold bid to address tax challenges of the digital era, 137 countries including India approved a pioneering global minimum tax of 15% for multinational companies.

This initiative by countries that between them command 90% of global economic activity was part of a two-pillar solution to tax the real winners of globalization fairly and finally—multinationals such as Meta, Google and many more that minimize their tax exposure by incorporating themselves in tax havens.

The first pillar aims to ensure a fairer distribution of taxing rights among jurisdictions over the largest and most profitable multinationals. It is expected that G20 finance ministers will welcome a draft Multilateral Convention to implement Pillar 1 at their meeting in July. The second establishes a global minimum effective corporate 15% tax rate.

The establishment of the so-called global minimum tax is the outcome of nearly 15 years of negotiations to mobilize what the G20 and OECD call a “tax fairness" agenda. In short, the G20 has introduced a regime of tax regulation for globalization. As a result, international tax is no longer an obscure technical practice for tax geeks; instead, it has become a highly political, highly relevant and highly scrutinized topic for the greater public.