Origins of IPL foreign funds being tracked

The governments probe into the Indian Premier League for suspected violations of financial and tax laws will comprise a thorough review of its funding sources from overseas. At the centre of the probe would be trail of Indian money being recycled through tax havens like Mauritius and brought back to the country as foreign funds. That apart,foreign funds from third countries being routed through tax havens would also come under the government scanner. The practice of domestic funds being routed through tax havens and brought back to the country of origin is called round-tripping. This is a preferred route for tax evasion across the globe.

The governments probe into the Indian Premier League for suspected violations of financial and tax laws will comprise a thorough review of its funding sources from overseas. At the centre of the probe would be trail of Indian money being recycled through tax havens like Mauritius and brought back to the country as foreign funds.

That apart,foreign funds from third countries being routed through tax havens would also come under the government scanner.

The practice of domestic funds being routed through tax havens and brought back to the country of origin is called round-tripping. This is a preferred route for tax evasion across the globe.

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The finance ministry and the department of industrial policy and promotion (DIPP) have commenced a process to ascertain the quantum of foreign funds in IPL and its multiple franchisees,an official source told FE. The objective of the exercise is to check the funding pattern of all the IPL teams from the angle of misuse of Indias treaties with tax havens.

The DIPP and the department of economic affairs in the finance ministry,along with the home ministry and intelligence agencies,met on Monday to prepare the action plan. The (IPL) teams would soon be asked to disclose detailed accounts of their funding to the government. This will enable the government to find out if theres been any breach of FDI norms and tax evasion, an official said.

The government estimates that by treaty shoppingchannelling investments through countries like Mauritius with which India has double taxation avoidance treaties to evade capital gains taxa substantial amount has been channelled into IPL teams.

Round-tripping of funds can often lead to money-laundering and breach of FDI sectoral caps,so a thorough check is a must, the official said.

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