Two summits of world leaders last week—G20 in Johannesburg and COP30 in Belém, Brazil—inspired hope and signalled that a modified universalism can’t wait despite a fractured world. At both the summits, developing countries showed a new assertiveness. Host of G20 meet, South African President Cyril Ramaphosa managed to pull off a declaration that reflected “renewed commitment to multilateral cooperation”, despite the US boycott of the event.
What was Ramaphosa’s message?
Ramaphosa stated unequivocally that humanity’s shared goals outweigh the differences across borders. In Belém too, the US was conspicuous for its absence. In fact, in the run-up to the summit, US officials made the ludicrous claim that the climate agenda smacked of a “green energy scam”.
Nevertheless, the message from the Brazilian city was loud and clear—the rich world can’t shift the onus of reducing greenhouse gas emissions to the developing nations. India made the forceful statement that it is doing more than its share in climate adaptation and that, as a fast-developing economy, it cannot be expected to prioritise climate action over growth.
PM Modi’s speech
In his G20 speech, Prime Minister Narendra Modi called for a global compact, which could help prevent misuse of artificial intelligence while harnessing it for the “global good”. This implicitly highlights that global solidarity is indispensable not just for addressing conventional issues such as nuclear proliferation, gender inequality, pandemics, tax conflicts, and the like, but even for regulating emerging technologies that have the potential to upend the world economic order, by redefining commerce, production tools, and competitiveness.
Such traction for global cooperation assumes greater utility in the current context where the US has unleashed a tariff assault on the rest of the world, in sheer neglect of multilateral pledges.
As far as India is concerned, G20 leaders’ commitment to engage constructively to address concerns regarding global minimum tax and tax challenges arising from digitalisation is of particular import. Going further, the leaders also vouched for a new OECD framework that will let nations strengthen tax transparency on immovable property, an idea that emanated from India at the New Delhi summit of the world grouping.
Global tax transparency is a desired goal only insofar as it builds a level playing field. The G20 reiteration of the validity of OECD’s two-pillar tax solution is commendable, especially because it came despite the Trump administration’s unilateral withdrawal from the hard-won 2021 agreement among nearly 140 nations, to put it into effect.
The Pillar-1 mechanism to deal with the tax issues around the fast-growing digital economy can’t be pushed back any longer. Increasingly, companies gain market access across the globe with minimal or no physical business in the jurisdictions concerned.
The physical presence rule for taxation tends to look outdated. With its vast consumer market and huge digital user base, India holds much potential to widen its tax foundation by having legitimate taxing rights on digital service providers from abroad. In fact, it was on the promise that Pillar-1 will be implemented under the 2021 agreement that India had revoked its two “equalisation levies”, one of which, applied on non-resident e-commerce operators, held high revenue potential. India’s policies have been turning liberal with overseas e-commerce firms; a plan is afoot to let them keep inventories for export markets. The latest G20 resolution to push ahead with the OECD-brokered pact is good news for India, which has already started losing revenue on this front, but is caught in an imbroglio.