India's Equalisation Levy: Why The Low-threshold Digital Services Tax Poses Challenges For Multinationals

The Organisation for Economic Co-Operation and Development and G20 member countries are developing a standardised approach to taxing the digital economy. Their ongoing collective effort aims to ensure relevant jurisdictions can tax their fair share of profits based on current digital and economic realities. Related OECD/G20 recommendations are known as Pillar One and Pillar Two.

Pillar One addresses taxing-rights allocation, profit allocation and nexus rules. In particular, it examines how to tax large multinationals that generate profits where they don't have a traditional tax presence.

Although the OECD has not yet agreed on the final approach to Pillar One , many countries have developed and implemented their own regulations for taxing cross-border digital services. Most of these country-specific taxes only affect very large multinational groups, typically those that have country-by-country reporting obligations.