The Indian government is reportedly looking at directly taxing non-resident Big Tech companies with more than ₹20 crore in revenue, and more than 500,000 users, the Economic Times reported. Companies such as Google, Facebook and Twitter will have to pay direct taxes on profits earned locally. This could be included in the Direct Taxes Code. This report comes a few weeks after the French Senate approved a 3% digital tax on digital companies with a revenue of more than €25 million in France. Numerous other nations, especially within the EU, are considering similar digital taxes.
Significant Economic Presence concept gains momentum
According to the report, the proposed direct taxes are a part of the “Significant Economic Presence” (SEP) concept that India had introduced and implemented through the Finance Act, 2018. At the G20 Finance Ministers and Central Bank Governors’ Meeting at the G20 Summit, Finance Minister Nirmala Sitharaman had called for adoption of this concept to tax global digital companies. This concept considers the “evidence of their purposeful and sustained interaction with the economy of a country” irrespective of their physical presence in the country.
Big Tech companies have often been accused of paying little taxes locally despite earning significant revenue and profits in India.