 you're watching Newscreen a few days ago, nearly 140 countries agreed on a proposal to enact a minimum of 15% tax on big corporates. Now, this has been in the works for a long time, there have been discussions going on for years. But what exactly is the nature of this proposal? How are countries likely to benefit? What are the critiques against this? To talk more about this, we have with this Professor Bishridhar from the Center of Economic Studies and Planning from Jahlal Lahiri University. Thank you so much, Professor, for joining us. Thank you very much. So, could you maybe first take us through a bit of the history of this proposal itself, because as I understand, this has been being discussed for a very long time. So, how did exactly so many countries agree on what seems like quite a radical proposal to impose this kind of a tax? Yeah, thank you for having me. And let me give you a bit of a history of this, you know, the global minimum tax that has been agreed to. Now, this whole idea began really after the 2008 financial crisis. And this was really a OECD proposal, where the argument given by the OECD was that there is a need to rein in finance capital and to target the tax havens, which were seen as the villain in the piece for having triggered the financial crisis of 2008. Now, the term that OECD used was base erosion profit shifting. And this was really, you know, something that was that described the entire operations of these multinational operations, which were always looked for, you know, the safe havens where they did not have to pay taxes, they actually escaped taxes. And then they would indulge in all kinds of illegal practices from money laundering to terrify dancing to whatever. And they would do that. And so the whole idea was to sort of reinrain them in. You know that, you know, we've also seen that happen in India, where Vodafone actually took over Hutchison SR in an offshore location, depriving the government of India of precious tax revenue in the applicant's tax. Now, you know, well, all this sounds very, you know, sounds very holy and sort of very, very logical. But the point is that, you know, one shouldn't see this on phase value. You know, this really came up not because the OECD countries, you know, the US and the other countries which are home to these multinational corporations suddenly found that these companies were, you know, sort of deep, big defaulters. This really came in my view because these countries actually needed tax revenue to shore up the huge deficits they're running up, especially after the pump priming they had to do after the 2008 financial crisis. So this was really a desperate move out of these countries to really get, you know, their taxes from wherever they could. And again, you know, let me also mention that this is not the first time that the US government at least tried to get after the multinational. In the 60s, when there was the US economy faced a bit of foreign exchange crisis and financial crisis, they actually tried to, you know, sort of put certain controls on the multinational. They didn't manage to do this. I think on hindsight, they decided they're not going to do it all alone. They would actually bring in other countries. And by the time that OECD had made this proposal, the G20 was also in place. The G20 in the sense that, you know, the summit level meetings of G20. G20 has been in place since the end of the East Asian financial crisis. But that was only at the finance minister's level. So the US, I think they decided to bring in other countries. And then they started this process. So BEPS, the best base erosion profit shifting project, really included all kinds of issues, including issues relating to transfer pricing. And something that the developing countries have been mentioning for a long time, complaining rather for a long time, that the multinational shortchanged the developing countries by under-invoicing exports and over-invoicing imports. But all those arguments fell on deaf ears for a number of decades. So all these issues have been brought in. On the one hand, one can say that, well, this is a kind of a victory for the developing countries that, you know, after all, they have been able to, there is recognition that the multinational have been indulging in this kind of financial crimes. And they need to be, they need to be disciplined. But on the other hand, you know, we've all been arguing that this is no big deal. Because if you look at the bottom lines and the kind of thing that we agreed to in terms of the global minimum tax, this is no big deal. But the only thing for us for developing countries is that we are not on a moral high ground. And if these countries decide to politically take on the multinational, they can. And I hope they will, because, you know, from this position, if they let go of this opportunity, this will be really sad. Because I think the kind of exploitation and I'm going to talk about a few more instances a little later. So I think this is the moment for us to really strive. Absolutely. So building on that comment you last mentioned about the kind of multinational that really have benefited the most, maybe from these practices, could you maybe take us to some of the sectors where such violations were probably the most rampant? No, I think it's happening everywhere. I think in every sector, it has actually been increasing. And I'll give you an example, for instance, like I mentioned that this transfer pricing was one of the ways in which the multinationals were sort of short changing the developing countries to use a diplomatic word. But if you come closer home, I was actually looking at some of the numbers of the payments on account of intellectual property that the developing countries in a low and middle income countries have been paying. The last two decades, this number has increased by, I've got some numbers here, have increased 22 times in the last two decades. So what is happening is that the forms in which the multinationals are exploiting the developing countries, these have changed. And there is no recognition, the fact that it's happening in India, the companies like Samsung and Hyundai, even Suzuki, the kind of rents they have been extracting on account of the intellectual property payments is huge actually. It's much, much more than the dividend outflow that has been happening. And this is one area we are not talking about. There is a general kind of recognition even in the developing countries where the governments, that intellectual property is very useful. We must try and focus on transfer of technology. We need technology for our development and all. But the one thing that no one talks about is what is the fallout, even if you get hold of this technology and these technologies are being used in this country or Samsung sets up a plant in Noida and starts manufacturing. What are the consequences of it? This is something that we are not talking at all, I would say. Absolutely. In this context also, regarding the proposal, I wanted to ask you something about the 15% slab itself. There were a lot of demands that it should be 21%, they brought more. I think even the US had started with 21%. Could you also take us through to why it actually came down to 15 and why how that process went on? Yeah, no, this is very strange because we have generally seen that when US makes a proposal of this kind, there is a tendency to sort of coalesce around the numbers that the US is throwing up. This is the first time that we are seeing that what has really happened is major deviation from what the US has actually proposed and is closer to what Ireland and Chile, for instance, have as minimum tax, the corporate tax, levels of corporate tax. So that actually shows one other important facet that there is a huge gap between what is being spoken and what is being intended. So for, I would say, public consumption, US, even in recent months, the US Finance Secretary, she was talking about the 21% number. But I think she never intended to be that high. She really intended to be sort of and that's how we have this number. So it's again the usual double talk that the developing developed countries have indulged in. And at the end of the day, we find that what has been agreed to will end up in a coffer which is much less significant and much less so for the developing countries because if the developing countries wish to benefit from this, then how do we get much less than what a higher level of minimum tax would have ensured? Right. So this context, actually, the other question was regarding the distribution of these taxes itself. So do developing countries have the possibility of getting a fair share or since a lot of these industries and corporates are located in the global north, will they end up actually getting more of these benefits? Obviously, the distribution will be in proportion to the revenues that they generated by these companies. Now, the other thing will be that because the revenues in the global north will be much higher for many of these companies as compared to the in the developing countries. So one is the revenue side will be an important issue. The second is that there will be lack of transparency. Again, it is very difficult for us in the developing world to expect that the developed countries will enable a situation where a fair share will be transferred to the developing countries. They will not do that. But again, as I said in the beginning, that the center exercise has grown out of a desperation of the developed countries to improve their profits because if you see the tax to GDP ratios, you can understand the kind of problems that they are facing. So you just cannot expect realistically that developing countries will get any fair share. Absolutely. And finally, one last question regarding the implementation of this proposal. I understand that each country also has its own process of passing law, passing regulations before these are implemented. So are there also likely to be obstacles around this which might lead to a broken system in a couple of years? Yeah, I think the first thing is that for India, we had the equalization tax on these digital companies. And so the first thing is that all these taxes will have to be withdrawn because now the roadmap that we're looking at is that this decision of earlier this month is going to result in a multilateral convention which is going to be held sometime next year. And the expectation is that by the beginning of 2023, this new regime is going to start rolling. So first is that all these things that the taxes that India, France and other countries have been putting imposing on the digital companies, those will have to be withdrawn. And the second is that there are a whole range of issues relating to the details which are not yet available. Because the only thing that we know is that extractive industries and the financial sector, the financial services sector, those are excluded from the deal which is quite significant actually. And then as we all know that the devil is in the details. So how this is going to work out, how they're going to be working out all the numbers regarding apportionment of the revenues between different countries and how the multinations enable these forces because ultimately the multinations will have to enable these forces. It's not going to be easy for the developing countries to do anything, unless the developed countries have the real intent to do this, it's never going to happen. So I think there is still a lot of slip between the top and the lip. We just have a very general kind of very broadly specified agreement. And also I must also mention is that you said at the beginning that there are almost 130, 140 countries, there are actually 137 countries. But many of these countries, you know, we're not all countries actually, we're talking about jurisdictions. And a large part of Africa is out of this agreement. And since we're talking about jurisdictions and not sovereignty here, there are a lot of these colonies of Britain and Netherlands and some other countries which are also part of this deal. So the 137 number doesn't really reflect what has happened. The participation of developing countries and this whole process was dismantled. The whole process was led by the developed countries. And it was done in a very ad hoc manner the way the OECD actually does this. And finally I would say that you also must recognize that these kinds of agreements have no enforce, they can't be enforced very strictly. So if you had a multilateral convention, for instance under the UN or something and with strong enforceable powers or powers of enforceability, then would be it would have mattered. So we are just looking at, like I said, that it's only a kind of a moral kind of a victory for the developing countries. They can only go out there and make a point that yes, globally now it has been recognized that the developing countries have been looted by the multinationals and something needs to be done. But surely this is not the forum to get all the problems sorted out. So that is what my take is. Absolutely. Thank you so much, Prof. Dharvar speaking to us. My pleasure. Thank you. That's all. We have time for the day. Keep watching.