India ditches its ‘Google Tax’, perhaps to tickle Trump • The Register

India once more ditches a tech tax, maybe to tickle Trump and dodge tariffs Already binned an e-commerce tax final yr The decrease home of India’s parliament on Tuesday handed the nation’s finances for 2025, after making a last-minute change that eliminated a tax on digital adverts.

The tax is known as an equalisation levy and since its introduction in 2016 has seen non-resident corporations required to pay six p.c of earnings derived from digital promoting. The measure was nicknamed the “Google Tax” and in accordance with Indian media raised INR 3,343 Cr ($390 million) within the final monetary yr.

In a Tuesday speech, finance minister Nirmala Sitharaman instructed India’s parliament she proposed to take away the levy from nation’s finances “in order that we will tackle the uncertainty in worldwide financial situations.”

The minister didn’t elaborate on what these uncertainties is likely to be, however Indian media has steered the choice to drop the levy is a response to the Trump administration’s threats to impose “reciprocal tariffs” on any nation that dares to tax US companies.

Underneath that interpretation, dropping the levy is seen as a pre-emptive capitulation that would spare India’s tech companies the prospect of getting tariffs imposed on their exports to the USA.

As India is at the moment attempting to change into an electronics manufacturing and export powerhouse, US tariffs on made-in-India items might be a setback.

India has already dropped a two p.c equalisation levy it imposed on overseas e-commerce corporations that provide items to Indian residents. Sitharaman ditched it final yr, citing its ambiguity and the substantial compliance burden it imposed on stakeholders.

That change, nonetheless, was made after introduction of the Organisation for Financial Co-operation and Growth’s (OECD’s) world minimal tax plan that aimed to make sure forestall world companies – and particularly tech corporations – pay tax within the jurisdiction the place they function. Huge Tech corporations have usually chosen to formally find their companies in international locations that cost low charges of tax or provide tax minimization schemes.

As soon as the OECD deal was in place, India due to this fact felt the e-commerce levy might have outlived its usefulness as a result of tech corporations would pay tax beneath different guidelines.

The identical reasoning might clarify dropping the digital adverts levy.

Nevertheless the timing of the choice to drop the equalisation levy can also be notable, as president Trump has stated he’ll make a significant announcement about tariffs on April 2nd but in addition dangled the potential of exemptions for some international locations.

This isn’t the primary time Uncle Sam has fought taxes like India’s equalisation levies: In 2021 the Biden Administration imposed a 25 p.c counter-tariff on nations that launched digital providers taxes designed to power Huge Tech corporations to pay extra tax however later suspended them as soon as implementation of the OECD tax deal commenced.

The Trump administration has since opted out of the OECD tax plan and stated it has no power within the USA. Huge Tech corporations might due to this fact once more be capable to scale back their world tax payments. If that occurs, India’s resolution to drop the promoting equalisation levy might imply it avoids tariffs but in addition loses two sources of income. ®