Don’t let Chidamabaram hear about this !!
Don’t let Chidamabaram hear about this !!
Category: Tax
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Is this tax planning or tax evasion?
From Pranabda’s white paper on black money
The Vodafone tax case provides an instance of the misuse of corporate structure for avoiding the payment of taxes.
In this case, the Hutchison Group had made investments in India from 1992 to 2006 through a number of subsidiaries having ‘separate corporate personality’ but which were essentially post box companies based in the Cayman Islands, British Virgin Islands, and Mauritius.
The Hutchison Group sold its entire business operation in India in February 2007 to the Vodafone Group for a total consideration of US$ 11.2 billion and the same was effected through transfer of a solitary share of a Cayman Islands
company.
When the tax authorities requested the accounts of the said company, the answer given was that as per Cayman Islands law, the company was not required to prepare its accounts.
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Chart:Genesis of Black Money
A great chart from Pranabda’s white paper on black money
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The coming service tax tsunami
The service sector accounts for 57% of India’s GDP (Source: GoI)
The Govt of India is all set to tax the living daylights of this sector.
In the last budget, Service Tax regime changed in a dramatic fashion-from a positive list it changed to a negative list.So now all services (other than those in the negative list) will be taxed.
The Service Tax was also hiked from 10% to 12%- a hike of 20%
The govt intends to introduce the Goods & Services Tax (GST) soon in the next 12-18 months.Once the GST comes to force, the service tax will be hiked up to 16% (see here)
So effectively, in a span of two years, the service tax will be hiked from 10% to 16% an increase of 60%
From an investment perspective, this implies a high inflation regime and a negative outlook for the service sector such as hospitality, housing etc