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India-US sign pact for exchange of reports
Why is it in the news ?
- India and the US signed an Inter-Governmental Agreement for exchange of Country-by-Country (CbC) reports of multinational companies(MNCs).
- The reports will be regarding income allocation and taxes paid to help check cross-border tax evasion.
More in the news
- The new agreement will reduce the compliance burden for Indian subsidiary companies of U.S. parent companies.
- The agreement will enable the two countries to automatically exchange the reports filed by the ultimate parent entities of the multinational enterprises in the respective jurisdictions.
- It will also obviate the need for Indian subsidiary companies of the American multinational enterprises to do local filing of the CbC Reports, thereby reducing the compliance burden.
- This is a key step in making India compliant with the Base Erosion and Profit Shifting (BEPS) project, of which it is an active participant.
- Base Erosion and Profit Shifting (BEPS):(1) Base erosion and profit shifting refers to the activities of multinational corporations to shift their profits from high tax jurisdictions to lower tax jurisdiction, thereby eroding the tax base of the high tax jurisdictions and depriving them of tax revenue.(2) In order to combat this, many countries entered into agreements to share tax information with each other to enhance transparency and make such profit shifting that much harder.
Source
The Hindu.