The Indian government is considering directly taxing big tech companies over the profits that they earn locally. The centre is mulling a revenue threshold of Rs 20 crore and a user base of at least 500,000 users above which non-resident tech companies such as Google, Facebook and Twitter would have to pay direct taxes to the government on the locally earned profits.
According to a report by The Economic Times, the proposed taxes are a part of the Significant Economic Presence (SEP) that was first introduced after the introduction of the budget last year. The introduction of the concept of SEP was closely followed by the Central Board for Direct Taxes (CBDT) calling for suggestions frame the rules for taxing scheme in July last year.
The Indian government, apart from levying taxes on the big tech companies as a part of SEP, is also planning to introduce the taxing scheme in the Direct Taxes Code, which aims to simplify the country’s laws pertaining to direct taxes.
The SEP will levy a tax of around 35 per cent on big tech companies, which is similar to the tax paid by the local firms, the report noted.
The move by the Indian government to directly tax big tech companies comes at a time when the Indian finance minister Nirmala Sitharaman is pushing the G20 nations to adopt the SEP as a concept for taxing big tech firms and close cooperation among the member countries to deal with ‘fugitive economic offenders’.
The move also comes at a time when the European Union is considering levying a tax of 3 per cent on foreign tech companies for the profits that they earn locally. If approved by the member countries, the European Union could tax tech firms whose global revenues are above 750 million Euros and annual taxable revenue in the region is above 50 million Euros.
Meanwhile, France has already passed a law to tax tech giants. As a part of the law, tech companies with over 750 million Euros in global revenues and 25 million Euros in French revenue will have to pay a tax of three per cent on the revenue generated from the company’s French users.