Acknowledging that effective taxation of mobile income is a key challenge, the G20 leaders including Prime Minister Manmohan Singh vowed to take steps to change rules to tackle tax avoidance, harmful practices and aggressive tax planning.
"Profits should be taxed where economic activities deriving the profits are performed and where value is created," the declaration adopted at the end of the summit of Group of 20 developed and major developing countries said.
Referring to the stand taken by G20, Economic Affairs Secretary Arvind Mayaram told reporters that every country has the right to tax profits made in their territory and it is a well accepted principle.
"It validates our position that we are going to tax profits made in India. Our aspiration (on this issue) is valid," he said, describing the G20 position as an "important landmark."The declaration said tax rules should not allow or encourage multinational corporations to reduce overall taxes paid by artificially shifting profits to low-tax jurisdiction.
"Cross-border tax evasion and avoidance undermine our public finances and our people's trust in the fairness of the tax system," said the declaration which devoted two pages of the 27-page document on the issue of addressing Base Erosion and Profit Shifting (BEPS), tackling tax avoidance and promoting tax transparency and automatic exchange of information.