Reporting in the New York Times on Friday put a hard number on something tax administrators around the world had been quietly calculating since January: roughly forty billion dollars in US corporate income tax has gone unpaid since the start of 2025 because the Trump administration walked out of the global minimum tax negotiation. Thermo Fisher Scientific alone reportedly shaved $3.5 billion off its tax bill via Malta. American Express, PayPal, Pepsi and others routed earnings through Cyprus, Bermuda, Switzerland and the Cayman Islands. The US Treasury took the position on day one of the second Trump term that the OECD's Pillar Two had "no force or effect" in the United States, and in January the OECD blinked.
That is the bare news. The harder question is what countries like India should do now.
What the side-by-side actually did
On 5 January 2026 the OECD Inclusive Framework released the Side-by-Side package. It is not a withdrawal of Pillar Two. In the polite language of international tax it is a structural exemption: US-headquartered multinationals are deemed to satisfy the global minimum tax standard because they are subject to the rebadged GILTI regime, now called Net CFC Tested Income, or NCTI. The Income Inclusion Rule and the Undertaxed Profits Rule will not be applied to them by other jurisdictions for fiscal years beginning on or after 1 January 2026.
The problem, which technical readers know and policymakers are still digesting, is that NCTI does not work the way Pillar Two does. NCTI permits global averaging across jurisdictions. Pillar Two requires a country-by-country effective tax rate at the 15 per cent floor. The two regimes differ by design. Calling NCTI "robust enough" to substitute for Pillar Two is a polite legal fiction, and the empirical evidence is now in. Forty billion dollars in fifteen months is not a rounding error.
India's seat at the table, and the larger irony
India was not a passive bystander in any of this. The OECD's own implementation handbook on the global minimum tax was prepared under the Indian G20 presidency. The G20 finance ministers' communiqué from Rio in July 2024 explicitly urged all jurisdictions to implement the minimum tax. India quietly withdrew its 2 per cent equalisation levy in August 2024 to align with Pillar One and Pillar Two, sacrificing a domestic revenue stream as the price of multilateral consensus.
Eighteen months on, the multilateral consensus has a hole the size of US corporate income in it, and India has neither the equalisation levy nor a domestic minimum tax. That is a bad place to be.
The QDMTT question is now the only question
Within the Pillar Two architecture there is a quietly useful instrument: the Qualified Domestic Minimum Top-up Tax, the QDMTT. It allows a country to impose its own top-up tax on undertaxed profits earned by multinationals operating within its borders, so that the revenue accrues domestically rather than to the parent country. The OECD's own Side-by-Side text reinforces QDMTTs as the principal mechanism for protecting local tax bases, particularly in developing countries.
For India, the case for a QDMTT was always strong. With the US carve-out, it has become close to obvious. If a US-headquartered multinational operates a significant capability centre or manufacturing presence in India and pays an effective rate below 15 per cent because of incentives or transfer pricing arrangements, the choice is straightforward. Either India collects the top-up itself, or it leaves the difference on the table. Under the side-by-side, no other jurisdiction will collect that top-up from a US parent. The money simply disappears.
The Income-tax Act, 2025, which came into force on 1 April this year, is the cleanest vehicle in which to introduce a QDMTT. The Act was designed as a generational rewrite. Slotting in a domestic minimum tax now, while the architecture is still fresh and the rules are being shaped, is administratively far easier than retrofitting later.
A closing argument from inside administration
The instinct of every tax administration when global rules get watered down is to wait and see. That instinct is wrong here. The signal from January is not that Pillar Two is dying. It is that Pillar Two will survive in a fragmented form, and the countries that move first on domestic top-ups will keep their taxing rights intact. Those that wait will discover, two budget cycles from now, that revenues have leaked through a perfectly legal door.
There is a quieter argument as well. India's credibility in international tax forums was built on two decades of substantive contribution. Walking away from that posture because the United States walked away first would be the wrong lesson. The right lesson is that multilateralism, when it cracks, is best repaired by countries who take the rule and apply it at home, not by countries who wait for the rule to be restored from above.
A domestic minimum tax of fifteen per cent on large multinationals, implemented through the new Act with the standard €750 million revenue threshold, would do four things at once. It would protect the domestic tax base. It would signal continuity of India's commitment to the BEPS framework. It would give Indian-headquartered groups a level playing field with US-headquartered ones. And it would, frankly, put forty billion dollars back on the table as a question other countries have to answer for themselves.
The carve-out is done. The window for the response is open. The next budget is the place to take it.
#IncomeTax #PillarTwo #BEPS #GlobalMinimumTax #IndianTaxation #PublicFinance #InternationalTax #CBDT
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