On Board PM's Special Aircraft: Pushing for a G20 action plan to combat tax evasion, India on Wednesday said it should not be seen as going after multinational companies avoiding billions in taxes and made it clear they should pay what is due in the country of operation.
Economic Affairs Secretary Arvind Mayaram said the country's tax rules are as much applicable to foreign companies as it is for Indian firms.
"India is not going after them (MNCs)," Mayaram said, adding the foreign companies must pay what is due. It would be wrong to suggest that India is going after MNCs, he said.
Mayaram was talking to reporters accompanying Prime Minister Manmohan Singh on his visit to the Russian city of St Petersburg for the eighth summit of the Group of 20 industrialised and major emerging economies.
He was asked whether the plans by the G20 to deal with tax evasion and avoidance would send a signal that MNCs are being targeted at a time when they do not need disincentives to invest during the current phase of global volatility which has severely hit big emerging economies like India.
Replying to questions, Mayaram said there is a resonance of India's position in the G20 on the need to develop "new standards" through consensus so that countries do not lose tax due to them.
Cooperation against tax evasion is among the key areas that will be deliberated by G20 leaders at the two-day summit starting tomorrow.
The G20 has already backed a fundamental rethink of the rules on taxing MNCs, taking aim at loopholes used by some top companies to avoid billions of dollars in taxes.
The Organisation for Economic Cooperation and Development (OECD), which has been tasked with working on an action plan to combat tax evasion, is to report on its work on Friday.
A key objective is to tackle techniques of what is known as tax optimisation, meaning accounting arrangements used by multinational businesses to minimise their tax bills.
The tax issue will also give a chance to the G20 countries to speak in one voice at a time when they are divided over the state of the world economy.
The G20 recently released an action plan drawn by the OECD that said the existing system did not work, especially when it came to taxing companies that trade online.
British Finance Minister George Osborne recently said that people and companies have to pay taxes that are due.
Large budget deficits and public anger at inter-company structure designed to channel profits into tax havens have often prodded governments to act.
According to Pascal-Saint Amans, Director of the OECD's Centre for Tax policy, the existing rules, which date back to the League of Nations, in the 1930s, had led to a "golden era" of tax avoidance.
He had recently said that governments' frustration with companies' aggressive tax avoidance provided a "once in a century" opportunity for action.
The OECD, which advises mainly its rich members on tax and economic policy, has two years to come up with specific measures that can be adopted internationally.
It has identified a raft of loopholes widely used by companies in the technology, pharmaceutical and consumer sectors.
The general assessment at the G20 deliberations here is to measure the success of the OECD project and whether there is a rise in the effective tax rates businesses pay.