Loan Guarantee Scheme for Covid Affected Sectors (LGSCAS)

Loan Guarantee Scheme for Covid Affected Sectors (LGSCAS)

Recently, the Union Cabinet has approved the Credit Guarantee Scheme (LGSCAS) for the COVID -affected areas.

Key Points

  • 130 countries around the world have joined a new two-pillar plan to reform international taxation rules and ensure that multinational enterprises (MNEs) pay their fair share of taxes wherever they operate.
  • Such companies generate high revenue, but pay very little taxes, as they set up their offices in countries with low or negligible taxes (tax havens) for tax purposes.
  • The two-pillar plan is being coordinated by the Organization for Economic Co-operation and Development (OECD).
  • The first pillar will ensure fair distribution of benefits and tax rights between countries in respect of large MNEs, including digital companies.
  • The second pillar seeks to set a minimum limit on corporate income tax competition through the introduction of the global minimum corporation tax rate, which countries can use to protect their tax bases.
  • Countries have long competed to attract MNEs with ultra-low tax rates and exemptions.

Importance of Two-Pillar Planning

  • Will support governments in collecting necessary revenue to deal with the pandemic.
  • It would be helpful in establishing control over tax haven countries, as the scheme nullifies the low tax incentives and discourages MNEs from transferring benefits.
  • Stabilization of the international tax system and increased tax certainty.

Working of the Global Minimum Corporate Tax

  • Suppose, a company headquartered in country A is reporting income in country B, where the corporation tax rate is 11 If the global minimum rate of 15 percent is applied, country A will ‘top up’ the tax and collect another 4 percent of the company’s profits from country B, which represents the difference between country B’s rate and the global minimum rate.

Source – The Hindu

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