Vol. 5, Issue 4 (2019)
Glimpse on companies tax avoidance, tax evasion and tax haven
Author(s): Gargi Singh
Abstract: Tax planning is allowed provided it is within the framework of the law. Colourable devices cannot be part of tax planning and it is considered to be wrong to encourage to avoid the payment of tax by dubious methods. Tax avoidance and tax evasion has not been defined under any Act; still they have prominence in the economy. Both terms can be understood through interpretation provided by court through cases. Most nations face the problem of tax avoidance and tax evasion. Such practices may lead to - substantial loss of much needed public revenue, increase in black money directly causing inflation, shifting burden of tax liability from tax dodgers and other consequences. As per section 2(17) of Income Tax Act 1961, a company means Indian Company or body corporate incorporate under the laws of a country outside India. Thus, a company whether Foreign or Domestic Company is liable to pay tax. Generally corporates avoids tax payment by investing through special purpose vehicle or entering into complex business structures. Government of India has taken initiative to lessen the scope of tax avoidance and tax evasion. Corporate tax: According to the income tax slab for assessment year 2017-2018, domestic company is liable to pay tax at 30%. But a tax rate at 25% is applicable if turnover does not exceed Rs. 50 crores (including surcharge and education cess). Whereas, foreign company is liable to pay at the rate of 40% including surcharge and education cess.