Nine top-class cricket nations fought for two years in the toughest form of international cricket for the chance to win the first test world championship, the marquee of the International Cricket Council in 2021. India started their campaign with seven straight wins and secured their place in the final after giving England a thoroughbred defeat in Ahmedabad. The final against New Zealand is to be played at the Ageas Bowl, home of the Hampshire County Cricket Club. It is quite intriguing that Hampshire’s ties to India are as old as the game of cricket itself. While the earliest clear reference to cricket dates back to 1597, Hampshire became one of the East India Company’s greatest benefactors from the early 17th century . Employment for his manpower, demand for his wood, inquiries for his ships, markets for his investors and consumers for his farmers. India gave Hampshire what it takes to build a modern city. Historically and culturally, the Ageas Bowl would not be too far-fetched, the home of the Indian team. Who, after all, fills the stands?
Incidentally, in the first week of June there was a high-profile meeting of the G7 finance ministers. Rishi Sunak, Head of the UK Treasury of Indian Origin, announced that a historic breakthrough had been achieved in establishing justice and equality in international taxation. The communique of the meeting obliged the G7 to grant market economies (countries with huge markets like India) a new right to tax. It also committed the G7 to the ideal of a minimum global corporate tax rate of 15%, which is essentially the beginning of the end of tax havens. But what does the G7 meeting have in common with the eagerly awaited final of the ICC? Exactly taxes and equity.
The biggest revenue generating item in a cricket event is broadcast rights. The ICC holds the broadcasting rights for the final of the Aegas Bowl. While we are unsure of the price to broadcast the finals, the ICC has significant income from cricket events around the world. The 2019 statement of comprehensive income estimates ICC’s annual net income at $ 392 million, near Rs 3,000 crores. That would be roughly Rs 650 crores in taxes if the company operated in a country where cricket is actually played. But the British Virgin Islands aren’t exactly famous for their cricket. Why does the ICC work from there?
The International Cricket Council is registered as a business company in the British Virgin Islands (BVI). The law applicable to such a company is the BVI Business Companies Act. Since the income generating activities of the International Cricket Council are outside the BVI, the ICC is exempt from all provisions of the Income Tax Act (including dividends, interest, rents, royalties). It also excludes capital gains made on most transactions by non-BVI residents. No inheritance, inheritance, inheritance or gift taxes from non-BVI residents on most financial assets. There is no stamp duty in the BVI on the transfer of shares in an international BVI trading company. The ICC is essentially exempt from all taxes on its global income in the British Virgin Islands.
Let’s look at the subsidiaries of ICC. The corporate structure of the ICC is shown below, along with the functions performed by each unit. As you can see, all companies involved in the exploitation of commercial interests and the generation of income are in tax-free legal systems / regimes. The entities in Dubai are located in free zones, identified by the “FZ” in their name. Free zones are essentially special geographic enclaves that offer tax-free vacation for a period of 10/15 years.
Dubai has only taxed oil and gas companies and foreign banks in the past. There is no withholding tax or capital gains tax in Dubai either. It is also known that Mauritius has a system in accordance with the nomenclature of the International Business Company or the Global Business Company system, under which tax exemptions / extensive tax exemptions are granted to companies that only earn income outside of Mauritius. The US registered ICC Americas clearly does not generate any revenue and so the ICC does not care where it is located.
With an income of $ 392 million, the ICC pays essentially no taxes. The ICC is not only located in tax havens, but is also involved in countries where the events take place in order to receive tax exemptions for the income from the events. However, it’s not entirely clear why the ICC has an aversion to taxes. Taxes build a nation. Taxes create an audience. Taxes build a sport. Taxes are necessary so that the ICC has healthy audience numbers.
Rishi Sunak promised to attack precisely these tax havens like the BVI, the United Arab Emirates and Mauritius at the G7 meeting. The UK’s overseas territories and dependencies satellite network consisting of the BVI, Cayman Islands, Bermuda and Jersey is often claimed to top the charts of corporate tax havens. So it’s not clear how the dichotomy will work. Will Britain really take significant steps to sever the arteries of its financial strength that are dictating conditions across the financial world today? With this in mind, the announcement by the British Chancellor of the Exchequer is fascinating. As much as Hampshire’s India connection.
It is conservatively estimated that tax havens are withdrawing taxes of 30 lakh crores from countries each year. The hardest hit countries are the market economies that emerged from the same colonies that were colonized about half a century ago. Tax havens, quiet and discreet, rob nations of their wealth.
With a low threshold of 15% minimum tax rate and possible exemptions for individuals, trusts and mutual funds, the G7 decision is a positive move, but not very groundbreaking. It remains to be seen whether the tax havens will come to an end.
(Subhash Jangala is Joint Director (OSD), Publicity Division, Directorate General of Administration and Taxpayer Services, CBDT. Views expressed are the author’s own views and do not represent those of the Government of India or Financial Express Online.)
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