India backs away from digital services tax after US pressure

Will keep taxing, but consider payments as credits for future global tax regime


India has agreed to wind back the two per cent Equalisation Levy it charges foreign e-commerce companies, and the USA has withdrawn sanctions it imposed to protest the levy.

The levy was introduced in 2016 as a means of ensuring India could collect more tax. The nation's government introduced it because big e-commerce players had employed legal-but-cynical tax minimisation schemes that saw them conduct purchases made in India with offshore entities – even though goods were sold in India, to residents of India.

The measure was aimed squarely at US-based companies such as Amazon.com, but also at India-based companies like FlipKart (which is owned by US-based Walmart).

The USA opposed India's levy and similar taxes imposed by Vietnam, The Philippines, and Indonesia, arguing they discriminate against its businesses.

In July 2021, the Biden Administration fought back by imposing tariffs on nations that implement digital services taxes, but immediately suspended that sanction.

The timing of that US action was not random. October meetings of the G20 and OECD saw broad international agreement reached on new global tax rules that will see multinational corporations pay at least 15 per cent of their revenue as tax in each nation where they do business. In theory, that arrangement should mean the likes of Amazon, Apple, Google, and Microsoft must pay tax wherever they operate, instead of being able to shop around for jurisdictions with low tax rates.

Once those deals were inked, the USA dropped its tariff threat.

But India didn't drop its levy, because the new global tax deal is yet to be implemented.

While India and the USA wait for those formalities to be addressed, they'll count the Equalisation Levy as a credit against future taxes, once the new global arrangements kick in. Those credits will accrue from April 1, 2022, until either March 31, 2024, or whenever the tax deals are sorted.

The US Department of Treasury hailed the deal with India as "a pragmatic solution that helps ensure that countries can focus their collective efforts on the successful implementation of the OECD/G20 Inclusive Framework's historic agreement on a new multilateral tax regime". America has also dispensed with its suspended tariffs on India.

India's government noted the agreement but expressed no opinion about its merits.

Austria, France, Italy, Spain, the United Kingdom, and Turkey have already reached similar agreements with the USA.

Tax-avoiding tech giants have been mostly silent on the new arrangements – perhaps because most announced their quarterly results mere days or weeks after the new rules were agreed. The Register expects that investors will soon press for information on how the new tax regime will impact the bottom line. ®


Other stories you might like

  • Prisons transcribe private phone calls with inmates using speech-to-text AI

    Plus: A drug designed by machine learning algorithms to treat liver disease reaches human clinical trials and more

    In brief Prisons around the US are installing AI speech-to-text models to automatically transcribe conversations with inmates during their phone calls.

    A series of contracts and emails from eight different states revealed how Verus, an AI application developed by LEO Technologies and based on a speech-to-text system offered by Amazon, was used to eavesdrop on prisoners’ phone calls.

    In a sales pitch, LEO’s CEO James Sexton told officials working for a jail in Cook County, Illinois, that one of its customers in Calhoun County, Alabama, uses the software to protect prisons from getting sued, according to an investigation by the Thomson Reuters Foundation.

    Continue reading
  • Battlefield 2042: Please don't be the death knell of the franchise, please don't be the death knell of the franchise

    Another terrible launch, but DICE is already working on improvements

    The RPG Greetings, traveller, and welcome back to The Register Plays Games, our monthly gaming column. Since the last edition on New World, we hit level cap and the "endgame". Around this time, item duping exploits became rife and every attempt Amazon Games made to fix it just broke something else. The post-level 60 "watermark" system for gear drops is also infuriating and tedious, but not something we were able to address in the column. So bear these things in mind if you were ever tempted. On that note, it's time to look at another newly released shit show – Battlefield 2042.

    I wanted to love Battlefield 2042, I really did. After the bum note of the first-person shooter (FPS) franchise's return to Second World War theatres with Battlefield V (2018), I stupidly assumed the next entry from EA-owned Swedish developer DICE would be a return to form. I was wrong.

    The multiplayer military FPS market is dominated by two forces: Activision's Call of Duty (COD) series and EA's Battlefield. Fans of each franchise are loyal to the point of zealotry with little crossover between player bases. Here's where I stand: COD jumped the shark with Modern Warfare 2 in 2009. It's flip-flopped from WW2 to present-day combat and back again, tried sci-fi, and even the Battle Royale trend with the free-to-play Call of Duty: Warzone (2020), which has been thoroughly ruined by hackers and developer inaction.

    Continue reading
  • American diplomats' iPhones reportedly compromised by NSO Group intrusion software

    Reuters claims nine State Department employees outside the US had their devices hacked

    The Apple iPhones of at least nine US State Department officials were compromised by an unidentified entity using NSO Group's Pegasus spyware, according to a report published Friday by Reuters.

    NSO Group in an email to The Register said it has blocked an unnamed customers' access to its system upon receiving an inquiry about the incident but has yet to confirm whether its software was involved.

    "Once the inquiry was received, and before any investigation under our compliance policy, we have decided to immediately terminate relevant customers’ access to the system, due to the severity of the allegations," an NSO spokesperson told The Register in an email. "To this point, we haven’t received any information nor the phone numbers, nor any indication that NSO’s tools were used in this case."

    Continue reading

Biting the hand that feeds IT © 1998–2021