Equalization Levy: A New Perspective of E-Commerce Taxation

Abstract

E-commerce has grown tremendously in the last few decades facilitating cross-border trade and commerce with a click of a mouse. This has given leverage to the multi-national enterprises to exponentially increase its revenue by shifting profits across jurisdictions. The disparity in tax treatment among the foreign players and their domestic counterparts has increased to a new high. The developing countries like India are losing their revenue which is eventually hindering the growth of digital industries in these countries. The old legal structures concerning international taxation are failing to keep a check on these digital transactions. Therefore, in order to stop this malpractice of profit shifting, India has enforced an equalization levy to tax the non-resident entities providing online specified services to the residents. UK and Australia also implemented the same in the nature of Diverted Profits Tax. This is in consonance with the Final Report 2015 of the BEPS Action Plans which formulated strategies to weed off the tax avoidance techniques adopted by the multinational enterprises.