New Delhi: Finance Minister Nirmala Sitharaman on Wednesday called on BRICS nations to share their experiences on treaty interpretation, transfer pricing and multilateral negotiations, saying international tax disputes disproportionately burden developing economies.
Follow The PSUWatch Channel on WhatsApp
Addressing a meeting of BRICS heads of tax authorities, Sitharaman said India has proposed setting up two new working groups — International Taxation and Transfer Pricing, and Revenue Statistics — at a time when global tax rules are being renegotiated.
“The rules of international taxation are being renegotiated. There are several multilateral tax issues, including the UN Framework Convention on International Tax Cooperation, under active negotiation,” Sitharaman said.
She said decisions taken over the next few years would shape cross-border taxation for a generation, making it important for BRICS economies to have a strong voice in the negotiations.
BRICS members, she said, are largely source jurisdictions and major developing economies that have built significant domestic tax capacity from a relatively low base.
Their experience and perspective are therefore important for ensuring fairness and durability in the emerging international tax architecture, she added.
Sitharaman flagged transfer pricing as a particular challenge for developing economies.
Transfer pricing relates to the pricing of transactions between related entities of multinational companies. Disputes arise when countries differ over how much of a multinational company's income should be taxed in their respective jurisdictions.
“Transfer pricing disputes cost developing-country administrations disproportionately. Revenue frameworks that don't fit our fiscal realities distort how we are seen and how we see ourselves,” Sitharaman said.
She said the proposed BRICS working groups would draw on the common experiences of member countries.
Follow PSU Watch on LinkedIN
Revenue Secretary Arvind Shrivastava said BRICS tax experts had spent two days reviewing the scope of work for the proposed groups.
The International Taxation and Transfer Pricing Working Group would create a permanent BRICS platform for sharing experiences on treaty interpretation, transfer pricing audits, Advance Pricing Agreements (APAs) and Mutual Agreement Procedures (MAPs).
It would also facilitate cooperation in multilateral negotiations, including those related to the UN Framework Convention on International Tax Cooperation.
The Revenue Statistics Working Group, meanwhile, would seek to develop a framework for measuring fiscal performance that reflects the realities of BRICS economies rather than relying on assumptions developed for significantly different economies, Shrivastava said.
Sitharaman also highlighted the transformation underway in tax administration globally, with authorities increasingly moving from paper-based and relationship-dependent processes towards data-driven and digitally mediated systems.
(PSU Watch is India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy. 👉 Click to join our channel now: PSUWatch WhatsApp Channel. Prefer LinkedIn? Follow PSU Watch on LinkedIN. Click to stay connected on Twitter here and stay updated)