PhonePe attacks global rivals; says RBI rules to plug loopholes used to evade taxes


Launching a scathing attack on global rivals, Flipkart-owned PhonePe Wednesday alleged that certain international firms are protesting RBI's mandate of data localisation as the move would bring digital payment apps of such companies under the ambit of Indian tax jurisdiction.

Such a mandate would also protect payment data of Indian users from being used to "sharpen user targeting engines" of companies like Google and Facebook who also offer products like search, maps and social media, PhonePe alleged in its blog.

It is pertinent to mention here that Alibaba and SoftBank-backed Paytm has also thrown their weight behind the local storage mandate.

In April, the Reserve Bank of India (RBI) issued a circular that mandated all payment ecosystem players operating in India to store all data related to user transactions within national boundaries only and had set a deadline of October 15, 2018.

This, however, had purportedly met with severe criticism from foreign payment firms.

A number of international players operate in the Indian payment segment today including the likes of Google (Google Pay), Mastercard, Visa and Amazon (Amazon Pay). Facebook-owned WhatsApp has also been testing its payments services in India, although it has not been able to roll out full-fledged services.

PhonePe contended that storage of payments data locally will enable a better regulatory oversight and "plug business-jurisdiction related loopholes that some foreign companies have long exploited to evade paying fair taxes in India".

"Most of the protests by Internet companies are related to the fact that RBI is forcing them to process and store payments data only in India. This word 'only' is at the root of the issue, because it also kills most facetious tax evasion arguments in play today," it alleged.

When contacted, Google declined to comment on charges levelled by PhonePe.

According to government sources, Google is learnt to have agreed to follow RBI's local data storage norm for payment services but has sought time until December to comply with the rules.

Google has championed free cross-border data flows and has said the socio-economic impact of restricting data flows must be thoroughly considered while framing any policy. Also, there is a need to find practical and contemporary solutions to policy issues in line with global best practices, the US-based tech giant had said.

PhonePe alleged that if the likes of Google Pay (formerly Tez - Google's payment app) are forced to process digital payments transactions only in India, then these companies cannot claim that the revenues generated from these apps fall under foreign jurisdiction just because their data servers are abroad.

"Indian tax jurisdiction gets very clearly established now," it said.

Confronting the San Francisco-based tech giant, PhonePe said Google needs to clarify its stand "more crisply"—whether it will process and store all payment transactions-related data only within Indian boundaries, or whether it is adopting data mirroring to keep all their processing systems and primary data storage abroad.

The blog noted that RBI's mandate will also make India's digital payments ecosystem "much more resilient to foreign attacks and global politics" and would create a level-playing field for domestic Internet companies as well.

On concerns of other countries possibly taking counter-steps, PhonePe said India isn't taking an isolated position on data localisation and that many governments across the world -- such as Australia, Canada, China and Russia -- have already passed their own versions of data localisation laws to protect their national interests.

Stating that it is majority-owned by a foreign company, PhonePe asserted that it still processes all payment transactions in India and stores all its "data on India servers only".

"We strongly believe that data localisation is critical for the long-term security of any country's financial services sector... We see no policy contradiction in terms of India having a liberal FDI policy, and having a strong data localisation policy. Both policies can and should co-exist," it said.