Taxmen on IPL trail in Africa

Published>Tue, Apr 27 10 02:22 AM

The Board of Control for Cricket in India may be trying to clean the Augean stables at the Indian Premier League, but the government is expanding its area of investigations, starting with South Africa . It is set to send a team of officials from the Enforcement Directorate, Department of Revenue and the financial intelligence unit to South Africa to investigate allegations of enormous gains made by the eight IPL franchises last year, whose tax incidence is not reflected in India.

According to sources, a team of around seven-eight officials will soon be despatched to South Africa to meet regulators and other authorities there.

The team would focus on the revenues of IPL-2 and of the eight franchises. The South African authorities have pledged full support to Indian tax sleuths on information-sharing, sources said. The second edition of IPL was held in South Africa , since the Indian government was unable to guarantee security for the matches which were scheduled at the same time as last year's Lok Sabha elections.

As reported by FE earlier, the earnings of IPL-II in 2009 stood at around Rs 775 core, which was a 17% jump over 2008 (IPL-I). Also, the earnings of the eight franchises in 2009 stood at around Rs 300 crore, 37% more than in IPL-I. However, these figures do not tally with the taxes paid by IPL, said sources.

According to sources, the government is keen to know if BCCI or IPL paid any taxes in South Africa . It also wants details on the actual quantum of earnings under various heads in IPL when it was held South Africa . As per internal calculations made by the tax department, BCCI should have paid taxes to the tune of over Rs 120 crore for 2008-09, which it did not. Also, since India and South Africa have a double taxation avoidance treaty since 1998, the investigating team will check the financial details of BCCI and IPL with officials from that country.

Even the service tax paid by IPL for 2008-09 is less than half of the payment made in 2007-08. According to finance ministry sources, IPL paid Rs 29 crore service tax for IPL-2, as opposed to Rs 64 crore for IPL-I. The Central Board of Excise and Customs (CBEC) wants to know why service tax paid for IPL-II was less than half the payment made for IPL-I.

Sources told FE that CBEC is not convinced that the service tax collections from IPL-II were lower just because the tournament was played abroad. "Since most of the tax-paying parties - the franchisor, the franchisee and various service providers - were the same for both IPL-1 and IPL-2, there should not be such a drastic drop in the tax payments," a source in finance ministry said.

The services sector accounts for three classes of tax payers - the franchisor (BCCI/IPL), the franchisees (team owners) and the service providers. Services range from management business, business auxilliary services, sponsorship, and sale of space and event management to outdoor catering and security services. On some services, the tax has to be paid both by the franchisees and the franchisor, while on others, a single party alone has to pay the tax.

Source: Web Search