G20 Current Affairs - 2019

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India joins WEF’s G20 Global Smart Cities Alliance on Technology Governance

India has joined the World Economic Forum’s (WEF) G20 Global Smart Cities Alliance on Technology Governance, a league of 15 of world’s leading city networks and technology governance organisations that will work towards advancing responsible and ethical use of smart city technologies.

India’s joining the league is a critical first step towards accelerating global best practices, fostering greater openness and public trust as well as mitigating risks regarding the collection of data in public spaces.

The G20 Global Smart Cities Alliance on Technology Governance

Background: The G20 Global Smart Cities Alliance on Technology Governance was established in June 2019, in conjunction with G20 Summit held in Osaka, Japan. It is an Alliance that comprises of 15 of the world’s leading city networks and technology governance organisations. It seeks to create global norms and policy standards for the use of connected devices in public spaces.

Secretariat: World Economic Forum

Founding set of Institutional Partners include

  • Presidents and host nations of Group of 20 (G20) in 2019 and 2020
  • Japan and Kingdom of Saudi Arabia
  • The Smart City Mission of India
  • Cities for All
  • Cities Today Institute
  • Commonwealth Local Government Forum
  • Commonwealth Sustainable Cities Network among others.

The partners represent over 2,00,000 cities and local governments, start-ups, research institutions, leading companies, and civil society organisations.

Significance: As growth and expansion of cities brings both enormous opportunities and significant challenges, these smart city technologies can help decrease traffic congestion, improve resilience during natural disasters combat crime, and reduce greenhouse gas emissions. Also, without proper governance, these technologies pose significant risk, notably to privacy and security.

Way Forward

The new global policy standards for privacy, security and sustainability of smart technologies will be rolled out in advance of 2020 G20 Summit scheduled to be held in Riyadh, Saudi Arabia. The first policy design workshops with city leaders will be held in November 2019 in conjunction with Smart City Expo World Congress in Barcelona, Spain.

India ratifies OECD’s convention to check Tax Evasion

India has ratified Multilateral Convention to Implement Tax Treaty Related Measures (MLI) to prevent Base Erosion and Profit Shifting (BEPS). It will pave way for amendments to double taxation avoidance agreements (DTAA) with countries signatories to convention to plug revenue leakages. The provisions enshrined in framework will come into effect from fiscal year 2020-21 for bilateral tax treaties.

Key Highlights

Earlier on 25 June 2019 India deposited to OECD an Instrument of ratification, along with India’s final position in terms of reservations, Covered Tax Agreements (CTAs), options and notifications under MLI.

Impact: MLI will modify India’s tax treaties that will help reduce revenue loss due to treaty abuse and Base Erosion and Profit Shifting (BEPS) strategies by ensuring that profits are taxed where ever substantive economic activities generating profits are carried out.

India’s DTAA with MLI shall get modified in following prominent ways-

  • MLI will modify their application in order to implement BEPS measures. It will be applied alongside existing tax treaties.
  • Avenues leading to avoidance of capital gains from alienation of shares or interests which derive value principally from immovable property would be plugged.
  • Some dividend transfer transactions that are intended to lower withholding taxes payable on dividends artificially would also be prevented.
  • As on date out of 93 CTAs notified by India, 22 countries have already ratified MLI and so DTAA with these countries will be modified by MLI.
  • Once MLI comes into effect, India’s DTAA will have a new Preamble and Principal Purposes Test (PPTs).
  • These changes would also lead to curbing of artificial avoidance of Permanent Establishment (PE) status through various arrangements.

Way Ahead: MLI will enter into force for India on 1 October 2019 and provisions enshrined in framework will come into effect on India’s DTAAs from fiscal year 2020-21 for bilateral tax treaties.

What is MLI?

The Multilateral Convention (MLI) is an outcome of OECD or G20 Project to tackle Base Erosion and Profit Shifting (called as BEPS Project). BEPS means tax planning strategies which exploit mismatches and gaps in tax rules so as to artificially shift profits to a low or no-tax location where there is little/no economic activity, which further results in little or no overall corporate tax being paid.