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
