Amid mounting pressure from the Supreme Court over the issue of black money, the government is preparing to turn the heat on MNCs as efforts to bring back money stashed overseas by resident individuals have run into legal hurdles. India is set to tighten rules for multinational companies that shift hefty profits to offshore group firms to escape tax.
MNCs and transnational companies enter into a series of transactions to move funds to their arms in tax havens and other jurisdictions where the income tax rates are significantly lower than India. This is done by MNCs buying services from their arm in India at less than the market price or fair value and selling it at a higher price outside, thereby booking profits outside the country. Such 'transfer prices' between 'related parties' are used to shift profits out of India.
An internal panel, set up by the government ahead of the Budget to review the transfer pricing regulation, has recommended a more robust legal framework to end the practice of MNCs mis-pricing products and services.
Unfortunately that's in India - not here, where George Osborne is doing the exact opposite.
Strange that, isn't it?