Opinion
Google tax: India mustn’t give up on a fair global taxation regime
Summary
- India’s move to withdraw its ‘Google tax’ is probably an attempt to soften US tariff blows. But our principled advocacy of fairly split taxes on multinational corporations must not flag. The OECD-G20 tax proposals need support.
India’s government seems set to drop its 6% equalization levy on online advertising services rendered to Indian advertisers by offshore digital businesses. This so-called ‘Google tax’—since it impacted this US-based web-search company perhaps the most, though also others like Meta and X—was introduced in 2016, but is abruptly being withdrawn just days before US President Donald Trump’s reciprocal tariffs go into force from 2 April.
What this move is expected to yield, however, remains unclear.
As a giveaway to US Big Tech firms that make money off India’s market through borderless operations, the purpose might be to show flexibility in trade talks with America, expected to revolve around business interests. But are we giving up too much too soon?
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This would not be India’s first concession. In August, New Delhi axed a 2% levy on e-commerce transactions, while the Union budget for 2025-26 slashed import duty on high-end vehicles that Trump is known to bat for. Given the US president’s latest threat to erect steep import barriers against any country that buys oil and gas from Venezuela, we may be pushed to choke off Venezuelan crude supply. While the Google-tax reversal looks like another peace offering, in going down this path, India must not lowball itself.
We still lack clarity on how Trump’s tariffs will apply. If the US matches Indian rates item-for-item, there may be little for us to lose, as the items we export to it do not overlap much with what we import from it. As Washington has yet not publicly stated what shape its trade barriers will take, and it has held off punitive levies on the imports of some countries, there may be scope for a reprieve—or even a grand bargain. After all, tariffs are not costless for the US, which has been wielding them for leverage over other governments.
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What exactly Trump expects of India, apart from buying specified US commodities and arms, will only be clear once negotiations proceed. Unfortunately, whether tax relief for Big Tech enables better bilateral ties may be hard to make out even if a trade deal is struck. While the mutual aim is to sign a pact by autumn this year, India’s sweeteners look likely to go into effect sooner.
Although an ad-hoc approach to policy would only mirror what the US is doing, Indian autonomy demands that we resist our frameworks being reshaped in an American image. To that end, we must stand by the principles espoused before Trump’s ascent.
Recall, the Google tax was levied to make up for lost revenues on value generation off Indian eyeballs by global sellers of digital ad-space. There was no reason for only US coffers to gain from their success. This view was shared by other nations, notably in Europe.
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Such was the outcry over powerful enterprises hovering above national borders and cherry-picking tax regimes that the Organisation for Economic Co-operation and Development proposed a plan for a fairer split-up of taxes collected from multinational corporations (MNCs). Endorsed by the G20, it had two pillars. The first would let local economies tax MNCs operating in their markets, with taxation rights carved up in a ratio of where they raise revenues from. The second sought a minimum levy on MNCs to stop the flight of their books to tax havens.
If the first pillar is adopted, the case for a Google tax would evaporate. But this proposal ran into resistance from the US, which seems wedded to an unfair status quo. For the sake of fairer taxation, though, it should remain on India’s advocacy agenda.
