Commerce Secretary Anup Wadhawan defended India’s imposition of a 2% digital services tax on foreign e-commerce firms, stating that companies benefiting economically from a country should be taxed even without a physical presence there. This comes in response to a recent report by the United States Trade Representative (USTR) that found India’s equalisation levy discriminated against American firms like Facebook and Amazon. Wadhawan expressed disagreement with the USTR’s conclusion, emphasizing that the notion of a permanent brick-and-mortar establishment is outdated, and if there’s economic benefit in a jurisdiction, taxes are justified.
He highlighted that countries within the Organisation for Economic Co-operation and Development (OECD) are also moving in this direction, implementing similar measures to tax firms with economic presence in different jurisdictions. Wadhawan suggested that the opposition from countries like the US is due to their significant dominance in e-commerce activities in foreign jurisdictions such as India. He anticipated that as economic activities become more balanced, these countries may reconsider their stance on taxing foreign entities without physical presence.
Wadhawan also addressed India’s ongoing efforts to finalize a mini-trade deal with the US, indicating that the sticking points in negotiations have been largely addressed. He expressed optimism about the Biden administration’s positive signals in US-India relations, indicating progress in resolving outstanding issues between the two nations.