India’s equalisation levy on Google and Facebook

Indirect tax might hurt start-ups

Business & Politics

News - Biz@India

June 1, 2016

/ By / Kolkata

Rate this post

The equalisation levy is targeting internet firms like Google, Facebook and Twitter who earns from Indian advertisers

Facebook, Google and other transitional online firms are now liable to pay an equalisation levy for all the digital services they provide in India. Will it solve the tax inconsistency related to the e-commerce or aggravate the complexity for mid-scale enterprises in India?

Although this is India’s first ever attempt in digital economy, the much discussed ‘Google Tax’ or Facebook Tax’ aims to indirectly tax the technology giants for the online business they do in India. Digital services such as online advertising, online transactions, storing or distributing digital content, etc will be constrained to pay an extra 6% equalisation levy.

The provisions relating to imposition and collection of equalisation levy incorporated as Chapter VIII of the Finance Act, 2016 comes into force from the 1st of June, 2016.

The Equalisation levy was announced during the union budget for the FY16 following the footsteps of Organisation for Economic Co-operation and Development (OECD)’s Base Erosion and Profit Sharing (BEPS) project. OECD is an international economic organisation of 34 countries, founded in 1961. They initiated the BEPS project in January, 2016 to regulate tax avoidance from transitional corporations such as Google, Facebook or Twitter.

Equalisation levy on Indian start-ups

While the Modi-led government is preaching easier business reforms in the country, the equalisation levy might well be a hindrance for Indian companies. The new tax regime is believed to increase compliance costs and accounting problems for Indian start-ups. The new tax on online companies will confer the responsibility on the Indian advertisers in terms of handling the deductions and depositions.

The harassment of maintaining all the online transactions and filing the tax for services seems like an uphill task for small and medium businesses. Albeit the equalisation levy aims to equate tax evasions from online firms, however, this will also have an impact on companies with an online setup using Facebook or Google for marketing.

Google faces tax raids in France

Unlike Britain, France remains strong in its stand to ensure that all transitional online firms operating in their land have to pay taxes. The recent tax raids in the Google bureau in France investigated and probed probable tax evasion with a strict outlook.

Google, which is now a part of Alphabet Inc, evades a huge amount of tax in most European countries as it reports almost all sales in Ireland. A major loophole in international tax law can be held responsible as per tax experts.

This week’s police raid is part of a separate judicial investigation into aggravated tax fraud and the organized laundering of the proceeds of tax fraud. It is speculated that Google might face a fine of up to EUR 10 million or half of the value of the laundered amount involved.



    Leave a Reply

    Your email address will not be published. Required fields are marked *