India Considers Deferring OECD’s Pillar 2 Tax Rules Due to Minimal Revenue Gains
The Indian government may delay implementing the OECD’s Pillar 2 tax rules, which set a minimum 15% corporate tax rate for multinational enterprises (MNEs) with turnover exceeding 750 million euros. Although India is expected to include an enabling provision for Pillar 2 in its Income Tax Act, the analysis indicates limited revenue gains of only Rs 100-200 crore annually. Given these findings, the government is cautious about surrendering its sovereign tax powers for minimal fiscal benefit.
Key Insights:
Minimal Revenue Increase: Adoption may yield only Rs 100-200 crore, with top-up tax collections highly dependent on the Qualified Domestic Minimum Top-up Tax (QDMTT) mechanism.
Global Collaboration vs. Sovereignty: Pillar 2 aims to curb profit shifting to low-tax jurisdictions. Yet, the government is hesitant to adopt it fully, as it may dilute India’s legislative autonomy over corporate tax.
OECD & Global Alignment: Pillar 2 is part of a broader global tax reform to counter tax abuse by MNEs and prevent competitive tax rate reductions, although the US has yet to implement it.
Despite limited revenue prospects, experts believe Pillar 2 will align India with international tax standards and discourage tax avoidance.
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