India Losing Over Rs 70,000 Crore In Taxes To Other Countries – Free PDF

What has happened?

• Countries are losing over $427 billion in tax each year owing to international corporate tax abuse and private tax evasion.
• India’s annual tax loss aggregates to $10.3 billion.

• These are the findings of the first study led by The Tax Justice Network (TJN),
• Which is an independent research based international network, that was published in alliance with other organisations.
• The report analyses data that was self-reported by MNCs to tax authorities, owing to the Base Erosion and Profit Shifting (BEPS).
• Of the $427 billion in tax globally lost by countries each year to tax havens,
• $245 billion (or 57.4%) is directly lost owing to corporate tax abuse by multinational corporations (MNCs) and $182 billion (or 42.6%) owing to private tax evasion
• MNCs paid billions less in tax dues by shifting $1.38 trillion worth of profit out of the countries where they were generated and into tax havens, where corporate tax rates are extremely low or non-existent.
• Private tax evaders paid less tax than they should
• have by storing a total of over $10 trillion in
• financial assets offshore

Impact on India

• For India, which is said to lose $10.3 billion annually in the form of taxes lost to other countries, ‘outward foreign direct investments’ (OFDI) is its most vulnerable channel, with a 66% vulnerability score.
• Mauritius, Singapore and Netherlands are the top three countries that contribute the most to this vulnerability factor.

• The report pegs India’s GDP at $2.51 trillion (based on the average of the past ten years),
• Based on this India’s tax loss is placed at 0.41% of its GDP and works out to $8 per population of a billion plus.

solutions

• Solutions suggested by TJN and other partners to this study are that-
• Governments should introduce an excess profit tax on MNCs such as global digital companies, who are making excess profits during the pandemic.
• They also propose introduction of wealth tax with punitive rates for opaquely-owned offshore assets.
• Lastly, as OECD is perceived as a rich-countries conglomerate, they seek a United Nations (UN) tax convention to set multilateral standards for corporate taxation and ensure tax co-operation between governments.
• Higher income countries are responsible for 98% of global tax losses borne by countries which aggregates to over $ 419 billion each year.

Q) Which of the following actions of the govt. can help in reducing the current account deficit?

1. Devaluing the domestic currency.
2. Reduction in the export subsidy.
3. Policies which attract greater FDI and more funds from FIIs.

1. 1 & 2 only
2. 2 & 3 only
3. 3 only
4. All of the above

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