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How did a gaming company sneak out hundreds of crores of rupees without paying tax?

₹ 700 crores. That's how much an online gaming company had managed to smuggle out of India without having to pay any taxes. And how did they manage to do it?

Through cryptocurrency!

But how did this happen right below the Government's nose? What company is this? We answer all of this and more in this post.

Parimatch is a Cyprus based international online sports betting and gambling platform that allows users to bet on sports events and play casino games through its website and app. Its one of the leaders is this space actually.

And Parimatch is at the at the crosshairs of a GST probe. This GST probe is being spearheaded to unearth the prevalence of overseas gaming and betting websites and applications trying to evade taxes.

But the question is how are companies like Parimatch doing this?

The answer is through a mechanism called Base Erosion and Profit Shifting (BEPS).

Let's explain what this is.

Certain countries have a very lenient taxation system. Some of these don't even collect taxes like UAE, Bahrain and Qatar among others. And the others have really favourable tax policies like Cayman Islands, Luxembourg and Switzerland, inter-alia.

In contrast with these, India has a really high average tax percentage. So companies device a strategy to move the profits made from countries like India where the tax is high to a place where its really favourable for them, like Dubai. This way, the company needn't pay high taxes because the profits earned are moved to a favourable tax base, that is Dubai, here again.

Did Parimatch do the same?

Yes, it acted through a network of shell companies to funnel out money through cryptocurrency. The Directorate General of Goods & Services Tax Intelligence had to track the operations of the network over several months, including in-depth inquiry of 50 entities and individuals in Delhi, and 350 in Kolkata.

So what do Governments do to prevent BEPS?

They employ strategies to prevent it, like

  1. implementing stricter transfer pricing regulations to ensure fair pricing between related entities

  2. enhancing transparency through country-by-country reporting

  3. adopting international agreements like the OECD's (Organisation for Economic Co-operation and Development) BEPS project, which recommends guidelines to counter aggressive tax planning.

  4. exchanging information and strengthening cross-border cooperation among others.

BEPS is an active Tax evasion strategy. This is illegal. But would you believe us if we told you there are certain strategies that the Government itself encourages to reduce tax burden?

Yes, these are called Tax saving strategies. These happen within the four corners of law and are completely legal. These strategies need to be applied during the year rather than at the end of the year, just before tax filing. But what are these and how to get them done?

That's why we do what we do at Sawingz! We offer the best tax saving strategies through a thorough planning of your finances. We have a really accomplished advisory team. And the best part? Your first advisory is on us! Completely free of cost. All you need to do is use our calendar widget on the homepage. Or text/call us at 78920-37507 to book your free consult to get started.

700 crores were moved outside of India without payment of tax. And now you know how.

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