The BBC accepted that it has been paying too little tax in India, according to government sources on Monday, June 5, following a period of intense scrutiny by the Income Tax Department.
BBC’s acknowledgment that it had paid lower taxes than its liabilities in India was first reported by The Times of India, which quoted several anonymous government sources.
The tax department sent agents into the broadcaster’s offices in Mumbai and Delhi to conduct an investigation in February. The Indian Express described the raids as an investigation into “deliberate non-compliance with transfer pricing rules” and the BBC’s alleged “vast diversion of profits”.
Critics had initially suggested that the search was a retaliation by the Modi government after the BBC had broadcasted The Modi Question, a documentary critical of Indian Prime Minister Narendra Modi.
New ICAEW president appointed
Mark Rhys was appointed president of the Institute of Chartered Accountants in England and Wales for 2023/24 yesterday, June 8.
As ICAEW president, Rhys will lead on the institute’s 10-year strategy. He joined the ICAEW Council in 2018 and became a board member that same year.
Rhys qualified as a chartered accountant with Arthur Andersen in 1987, eventually becoming a partner at the firm in 1996 and auditing a variety of financial clients. He later joined Deloitte as partner and financial services specialist.
Founded in 1880, the ICAEW represents almost 200,000 people worldwide, including professional accountants and students. The institute also serves as a regulatory body and monitors around 12,000 firms.
Every ICAEW president serves a one-year term. Rhys succeeds Julia Penny and will hand over to Malcolm Bacchus when he steps down in June 2024.
UK has limited space for tax cuts before 2024, says OECD
The OECD warned that the UK government has “limited fiscal space” for tax cuts despite moderate economic growth, reported Reuters on Wednesday, June 7.
Prime Minister Rishi Sunak and Chancellor Jeremy Hunt have hinted at tax cuts by the end of 2023 ahead of the next general election, expected in 2024. Sunak is facing increasing pressure from Conservative members of Parliament over tax policy.
However, the OECD forecast for the UK economy found that the government has limited space for tax cuts because the priority will be on tight monetary policy to restrain inflation, which stands at 6.9%. The OECD projects it will fall to 2.8% in 2024.
OECD criticises Vietnam’s compensation plan for minimum tax
OECD officials have told the Vietnamese government not to grant companies such as Samsung Electronics handouts to offset tax costs, reported Reuters on Wednesday, June 7.
The Vietnamese government is considering a compensation plan for businesses hit by the 15% minimum corporate tax rate. However, sources close to the talks told Reuters that the OECD has warned this would just shift the tax burden to another jurisdiction.
Korean technology company Samsung Electronics could stand to gain millions in subsidies under a compensation plan in Vietnam, but the OECD has reportedly warned this would mean South Korea would have to impose a higher top-up rate on the company.
Vietnam is a major manufacturing hub and the government fears losing investment over the minimum tax rate. Nevertheless, Vietnam is committed to the OECD’s pillar two plan for a minimum corporate rate including a qualified domestic minimum top-up tax.
Neither the OECD nor the Vietnamese government has publicly confirmed or denied this report.
FCA fines brokerage firm ED&F Man £17.2m over dividend tax scam
The UK Financial Conduct Authority fined brokerage firm ED&F Man Capital Markets £17.2 million ($21.5 million) for its role in one of Europe’s largest tax scandals, reported the Financial Times on Monday, June 5.
The ‘cum-ex’ scandal, sometimes referred to as dividends stripping, involved the illegal reclaiming of capital gains tax on dividends in multiple European jurisdictions.
In the case of ED&F Man, the scandal took place in Denmark. Between 2012 and 2015 the firm filed at least £20 million of illegitimate tax claims to the nation’s tax authority, according to the FCA, and earned £5.1 million in fees as a result.
The scandal is ongoing, but regulators have found that these practices stretch across Europe and beyond, even as far as the UAE.
Diesel tax U-turn in Brazil
The Brazilian government is set to restore a federal diesel levy in September, as it hopes to lower auto prices in the country, reported Reuters on Friday, June 2.
According to the Reuters report, President Luiz Inácio da Silva will exercise his executive authority to phase out the diesel tax exemption – a policy that was enacted in 2022 by his predecessor Jair Bolsonaro.
The plan is to tax every litre of diesel by R$0.11 and to raise around R$1.5 billion ($304 million) in revenue.
An estimated two-thirds of the proceeds will be earmarked for bus and truck manufacturers that lower their auto prices. The remaining R$500 million will go to companies producing passenger cars.
Vice President Geraldo Alckmin predicts the decree will result in substantial discounts of up to 11.6% for consumers.
The tax exemption was first introduced to combat high inflation, and phasing it out in September could slow the decline of rising prices. The OECD estimates the rate of inflation in Brazil is 4.2%.
Next week in ITR
ITR will be running an exclusive story from reporter Euan Healy about a UK tax avoidance scheme. We will also be publishing the cover feature on PwC and the Australian tax leaks scandal for our summer PDF issue of ITR.
Readers can expect these stories and plenty more next week. Don’t miss out on the key developments. Sign up for a free trial to ITR.
