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Explain the purpose of global minimum corporate tax and discuss how it can help in plugging the Base Erosion and Profit Shifting (BEPS) issues.

Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

6. Explain the purpose of global minimum corporate tax and discuss how it can help in plugging the Base Erosion and Profit Shifting (BEPS) issues. (250 words)

Reference:  The Hindu

Why the question:

The article presents an analysis on the proposal for a global minimum corporate tax, avenues for India and scope of international disagreements.

Key Demand of the question:

Explain the purpose of global minimum corporate tax and discuss how it can help in plugging the Base Erosion and Profit Shifting (BEPS) issues.

Directive:

Explain – Clarify the topic by giving a detailed account as to how and why it occurred, or what is the particular context. You must be defining key terms where ever appropriate, and substantiate with relevant associated facts.

Structure of the answer:

Introduction:

Start with the definition of what global minimum corporate tax.

Body:

The answer body must have the following aspects covered:

Discuss the background of the question briefly – The U.S. has sought to impose a global minimum tax on foreign income earned by U.S. corporations. The proposal is perhaps intended to disincentivise American companies from inverting their structures due to the increase in the U.S. corporate tax rate.  The proposal is similar to Pillar Two which was the Organisation for Economic Co-operation and Development’s (OECD) plan to plug the remaining Base Erosion and Profit Shifting (BEPS) issues.

Discuss the possible benefits for India from global minimum corporate tax regime.

Conclusion:

Conclude with way forward.