Is BBC World Service flush with transfer pricing margins?
By Venkatesh Raghavan*
Mumbai: Is the BBC World Service flush with transfer pricing margins? As the tax authorities continued with their rummaging on the second consecutive day today at the British Broadcasting Corporation (BBC) offices in New Delhi and Mumbai, the Income Tax sources informed that the survey was essential to carry out investigations into the company’s alleged tax evasion attempts in India. The I-T authorities were questioning BBC staffers from the Finance and other related departments even at the time of going to press.
Sources said the surveys were not intended for the editorial staff and the BBC responded by stating that the broadcast staff can report to work and all other categories of employees can continue to work from home.
Also read: Why should the Opposition cry foul when BBC is under IT lens?
While media houses in the West laid emphasis on the freedom of the press being curbed as in India’s Emergency period, the tax sleuth in Mumbai informed that it was a standard procedure followed by any tax investigation foray to seize mobiles, deactivate landlines and ensure that there was total compliance to the orders in place.
Significantly in Washington, responding to a question on the raid during a press conference today, the United States State Department spokesperson Ned Price told the questioner that “I would need to refer you to Indian authorities for the details of this search”. Price added: “Beyond this discrete action, what I’ll say more broadly is the general point that I’ve consistently made in this context but in the universal context as well: We support the importance of free press around the world. We continue to highlight the importance of freedom of expression and freedom of religion or belief as human rights that contribute to strengthening democracies around the world. It has strengthened this democracy here in this country; it has strengthened India’s democracy. These universal rights are the bedrock of democracies around the world.”
When probed further on whether the action on BBC went against the spirit of democracy, Price replied, “I couldn’t say. We’re aware of the fact of the searches, but I’m just not in a position to offer a judgement”.
The investigation by the I-T department, sources said, is intended at unearthing transfer pricing-related irregularities. Transfer pricing can take place between two independent corporate entities or also between a corporate body and its subsidiaries located in different corners of the globe. When transfer pricing is between the corporate body and its subsidiary in two different countries, the price that is pegged on the transaction can be manipulated to evade taxes. For example, a company in Mumbai can conduct a transaction with a shell company in Mauritius, with the cost running into say INR 20 lakh. The shell company at the tax haven can carry out a forward transaction worth INR 40 lakhs with another subsidiary located in a different part of the world. Transacted in thousands of crores of rupees it results in heavy revenue loss for the government department that is in charge of scrutiny of such transactions.
Informed sources also opined that BBC World Service is required to come clean on how it’s been using its funds from abroad besides its source and purpose of funding. Senior management officials from the BBC are subject to questioning from the I-T department and the BBC gave an official one-line diktat asking employees to fully cooperate with the tax authorities on all queries other than that about their personal income.
Meanwhile, the Brihanmumbai Union of Journalists (BUJ) in a statement expressed its concern over the ‘raids’ and deplored the use of such “intimidation and overkill” which it claimed was tantamount to “blatant harassment” of the broadcaster, less than a month after it aired “India: The Modi Question”, a documentary on Prime Minister Narendra Modi’s role in the Gujarat violence of 2002.
The BUJ claimed that the manner in which the Union Government “has used the weapon of raids on media houses that have shone a critical light on certain events and personalities is a cause of concern for every democratic citizen and organization”.
However the All India Bar Association (AIBA), an association of lawyers, “congratulated” the IT department for going through BBC’s documents to check irregularities regarding international taxation and tax deducted at source. AIBA chairman Dr Adish C Aggarwala went on to request Union home minister Amit Shah to order a “360-degree probe into the international conspiracy angle in the BBC’s documentary on Prime Minister Narendra Modi.