Chillin' out till it needs to be funded
A rather ambitious task for Kaushik Basu, and Pranab Da himself as the IPL controversy around funds for the $333 and $300 million bids for two teams that have been triggered by $16.5 million in “gratification” passed off as sweat equity seemingly setting the stage for undermining India’s efforts to avoid being labeled as a banana republic and a destination for questionable funds without source or tag and traceable to funding for drugs, terrorism and probably even more.
Offshore banking that allows you to keep $1 million plus assets in Caymans, Singapore, Bahamas, Channel Islands or other such neutral destinations like our popular Swiss banks have always been credited with most of the financial assets, “savings” and “earned cash” or sweat money for brokering deals in the fancy of the urban middle class. Swiss account do hold a lot of such assets, because these funds cannot be returned to any other “heir” easily nor handed to the government under current law. Most other destinations however are viable tax shelters required for businesses that do make International transactions. However, all this is for a mere flavor of simplicity as a labyrinth of overlaid tax regulations and contested / expired treaties have made good business for Tax and Audit firms like Thornton and KPMG in arranging any FDI program or channeling investments from global hubs, Mauritius being a popular port in India’s case because of some older tax structure that are also on the verge of repair and rebuild. Vodafone in fact walked away with a $2 billion deal where it is now retroactively being chased for a $1 billion tax incidence as the seller or the receiver of funds has no footprint in India any more.
In the IPL, the investments by News Corp scion Lachlan Murdoch may or not be ably investigated based on the clarity available in documents. More clarity is unlikely to emerge before the law of the land is updated to add Sports investments to specific clauses in our Foreign Investment policies and procedures. Even where domestic equity has been issued, the Kochi case unfortunately makes It imperative that each transaction be checked for its trail of sources and corresponding verification with Indian corporate Law. Bid Procedures may now be questioned as compromised by nepotism and casual failures as Lalit Modi comes under increasing scrutiny. The priorities of the taxmen, ED and other agencies are unlikely to be the same as the media because the political ramifications are easily managed by the inter departmental processes and learnings from earlier instances of deal failures and modus operandi available much as “case law” influence legal process and available resolution
The best series on th current ownership structures and the sequence of events in the current IPL induced “habba habba” is with TOI’s new serious Saturday reading, “The Crest” Each of the 8 existing teams and the 2 new teams have distributed ownership of the teams, unknown to public knowledge and current regulatory gaps making it likely that each teams IPO will be preceded by live media scrutiny with a few explosions to follow. Thus it is better if MoF does follow up with the process that has been begun and closes the loop with Indian Corporate law, FDI and domestic Tax law along with the new Corporate Law Code that is going to follow after the successful DTC for Income Tax and GST roll outs. A lot of clarity is required as we also revisit FDI in media & entertainment and Multi Brand Retail / Cash & Carry mechanisms.
[Tag Sports Infrastructure, CWG, IPL, India, FDI, Mauritius, Offshore Banking]