The Great Google Tax 🤑

by Yash Kaviya

Don’t you just hate those ads before you watch that funny youtube clip or before you can peacefully enjoy that track on spotify? 😕

Well, India collected about INR 4000 crore from such ads. Remember the Google Tax? Turns out it’s still quite hot. Back in 2016, India introduced an equalisation levy at 6% on companies which do not have a physical presence in India. 🙆‍♂️

Let’s break it down, bit by bit

Thinking of an example, Hungry Birds is a mobile internet game setup in Finland. With their rapid rise in popularity, over 100 million users in India downloaded the game and enjoyed it. Now, Hungry Birds was making millions of dollars in profit through advertisements and offering in-app purchases to their user base in India who were playing the game.

But, because they did not have a physical presence in India, they didn’t have to pay any taxes in the country, and often routed their revenues through tax havens like Cayman Islands, Luxembourg, etc. This almost became an SOP (Standard Operating Procedure) for a lot of digital companies around the world. 🤹🏻‍♂️

That’s when the Digital tax, popularly known as the Google Tax came in to cover such internet companies like Google, Facebook, Netflix and Microsoft, etc. Governments around the world soon realised that these digital giants were using such loopholes to bypass tax laws leading to losses in millions of dollars of tax revenue.

So, the next course of action? 136 nations, including India, came together to create a global tax deal and make sure global digital giants pay a minimum tax of 15% wherever they operate.

All OECD (Organisation for Economic Cooperation and Development) countries drafted a tax deal which will come into effect from 2023. It primarily has 2 pillars,

  1. Pillar 1: Taxing companies with 20 billion euros in revenue to cover nearly top 100 companies.
  2. Pillar 2: A minimum tax rate of 15% for companies with revenues over 750 million euros.

Once this multilateral tax agreement comes into play, OECD has demanded for countries to withdraw individual tax measures and their word to not introduce them in the future. eg: equalisation levy in India. 📉

Let’s decode the equalisation levy. Take for instance, a company selling Tshirts in Spain wants to advertise its products to potential customers in India through Google, and pays 100 USD to Google for advertising. A tax of 6% would be the charge that Google will have to pay to the Government of India. 

Now, Google came up with an interesting way to handle this, by passing the buck of surcharge to their customers. Other companies are soon expected to follow suit.

We might choose to turn a blind eye to such taxes that operate on grand proportions but eventually it will be affecting our lives on the internet.

Do you think it will affect your Netflix subscriptions? 😰

😵 Cow Cess- Crazy Tax Story

We all know what a moo point is but guess what is not a moo point? Cow Cess. That’s right, some states in India levy Cow Cess for the purpose of taking care of stray animals. 🤪

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