After a series of moves culminating in Donald Trump's Executive Order on 20 January 2025 pronouncing the “Global Tax Deal” to have “no force or effect” in the United States, the country walked out of the international tax agreement brokered by the economic thinktank Organisation of Economic Cooperation and Development (OECD) for industrialised countries.
The deal was meant to ensure that global profits of multinational companies are taxed at a minimum of 15 percent, and digital companies, in jurisdictions where they earn profits.
The 138 members of OECD/G-20 had approved the arcanely worded Global Tax Agreement in July 2023, which empowered the countries consuming global digital services to tax the profits earned in their jurisdictions by delivering such services without being physically present (Pillar A), and to subject the multinational enterprises with physical presence in their countries to a minimum 15 percent income tax on the profits earned in those jurisdictions.
India is a prominent participant and signatory of the Global Tax Deal. The country has long suffered large loss of tax on digital services delivered by the non-resident companies.
In 2018, India began taxing Pillar A-type profits by implementing an ‘equalisation levy’ on digital services companies such as Netflix. India also faces from inadequate taxation of incomes due to ‘profit shifting and base erosion’, where companies move profits to jurisdictions with no or low tax rates.