India loses Rs 70k cr annually in tax evasions: Study

India loses over Rs 70,000 crore annually in tax evasions: Study

India suffers $10.3 billion tax loss annually, of which, a major chunk is corporate tax evasion

Representative image. Credit: iStock Photo

India is reportedly losing over $10.3 billion, equivalent to over Rs 70,000 crore, annually owing to international corporate tax abuse and private tax evasion. Globally, countries lose $427 billion tax across continents due to such tax evasions. 

A study titled 'The State of Tax Justice 2020' led by Tax Justice Network, showed that countries are annually loosing billions of dollars in tax evasion by various multinational companies and private wealth hoarders. 

Of the $427 billion tax evasions,  $245 billion was corporate tax abuse and the rest $182 billion was private tax evasion. 

The data used by the researches was self-reported by various MNCs under Base Erosion and Profit Shifting (BEPS) project, spearheaded by the Organisation for Economic Co-operation and Development.

The MNCs avoid taxes by moving profit out of the country where it is generated to places where the corporate tax is less or does not exist. Companies managed to transfer such profit to the tune of $1.38 trillion. Individual tax payers, however, moved their financial assets of $10 trillion offshore, thus, evading taxes, the study said.

The study further said that India suffers $10.3 billion tax loss annually, of which, a major chunk is corporate tax evasion and $202.15 million is offshore private tax evasion. 

The study has also introduced a metric to identify the channels through which tax can be potentially evaded. For India, it is ‘outward foreign direct investments’ (OFDI) that stands with a vulnerability score of 66 per cent. Foreign countries that contribute to this vulnerability factor are Mauritius, Singapore and the Netherlands. 

Major contributors to global tax loses are wealthy countries with high income, while the poor countries add just 2 per cent of the tax evasions. G20 countries alone involve in over a quarter of total global tax loses. 

As for solutions, the study suggests taxes for excess profits made by the companies, such as digital companies that managed to make hefty profits even during the Covid-19 pandemic. It also suggests punitive wealth tax measures for opaquely-owned offshore assets. And, it also calls for a United Nations tax convention to set multilateral standards for taxation and greater cooperation between countries.