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Cyber tax conundrum: Digital Service Tax could offer an interim solution -Suranjali Tandon

-The Indian Express

As countries calibrate their response to competing demands for sovereignty to tax, DST is an interim alternative outside tax treaties. It possesses the advantage of taxing incomes that currently escape tax and creates space to negotiate a final, overarching solution to this conundrum.

The taxation of digital companies has been a key concern for G20 countries. The agenda to reform international tax law so that digital companies are taxed where economic activities are carried out was formally framed within the OECD’s base erosion and profit shifting programme. Seven years since its inception, it is still work in progress. Worried they might cede their right to tax incomes, many countries have either proposed or implemented a digital services tax. India is amongst the first to have implemented an equalisation levy in 2016, which sought to tax payments made for online advertising services to a non-resident business by residents. In March 2020, it expanded the scope of the existing equalisation levy to a range of digital services that includes e-commerce platforms. Any payment made by non-residents in connection with an Indian user will now attract a 2 per ceSuranjali Tandon nt levy. Such an approach is often viewed as contrary to the ethos of international agreements. However, the proliferation of digital service taxes (DSTs) is a symptom of the changing international economic order. Countries such as India which provide large markets for digital corporations seek a greater right to tax incomes.

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