G7 Reaffirms Commitment to 15% Global Minimum Corporate Tax: Strengthening Global Fiscal Governance

Pillar Two applies to MNEs with annual revenues exceeding 750 million euros. If a company pays a lower rate in a particular country, its home country can apply a 'top-up tax' to bring the effective rate to 15%. This is complemented by Pillar One, which seeks to reallocate taxing rights over a portion of the profits of the largest and most profitable MNEs to the markets where they have significant consumer presence, rather than just where they have a physical office. For India, this development is highly significant. As a member of the OECD/G20 Inclusive Framework, India has been a vocal advocate for fairer taxing rights. While the global minimum tax helps in resource mobilization and prevents tax erosion, it also necessitates a review of India’s existing domestic tax incentives and the 'Equalisation Levy' (Digital Tax). The transition to this global regime represents a shift toward a more transparent, equitable, and stable international tax architecture. UPSC Relevance: This topic is crucial for understanding international relations and global economic governance. It can be used in GS Paper II to discuss global groupings (G7/G20) and in GS Paper III regarding resource mobilization, tax reforms, and the impact of liberalization. Aspirants should focus on the concepts of Base Erosion and Profit Shifting (BEPS) and the challenges of taxing the digital economy.