Global Minimum Tax (OECD Pillar Two) and India’s Corporate Tax Regime: A Critical Legal and Policy Analysis

Abstract

There have been drastic changes in the global corporate tax system since the arrival of the OECD’s Pillar Two policy, popularly known as Global Minimum Tax (GMT). Pillar Two was designed within the BEPS 2.0 project and sets a minimum effective tax rate of 15% for Multinational Enterprises (MNEs) that report consolidated income of more than 750 million euros annually. It aims to counter base erosion, eliminate tax competitions, and make sure that multinationals pay their fair share of taxes regardless of their location. Since India is an active member of the Inclusive Framework of OECD/G20, it has contributed towards designing such international tax standards; nevertheless, it has not passed domestic laws to enact the Global Anti-Base Erosion (GloBE) Rules. This paper analyzes whether the current system of corporate taxation in India is consistent with the OECD Pillar Two framework from the legal and policy perspectives. With the help of a doctrinal and analytical approach to research, the consequences of the application of the Global Minimum Tax for India's concessional corporate tax rates, fiscal incentives, fiscal autonomy, and investment policies are considered. Further, the possible use of a Qualified Domestic Minimum Top-up Tax (QDMTT) will be examined. The difficulties connected with the implementation of this approach will be discussed. Despite the fact that the OECD Pillar Two project is an important step towards international tax justice, India's strategy should take into account its development goals.