💳 MasterCard’s Tax Tango

by Yash Gohel, Anshumi Shah and Anushka Shah

Hey,


Do you know Kevin Mayer? He is a former Disney executive who went on to become TikTok’s chief executive officer. Now, Kevin Mayer has resigned TikTok over USA’s entire ‘sell TikTok to an American company saga.’ The video-streaming giant has found itself in a tight position for the last few months.

Maybe Kevin hadn’t signed up for this.


💳 MasterCard’s Tax Tango


Imagine you went to your professor to increase your marks. The professor reads it. But reduces your grade instead! Mastercard Asia Pacific Ltd. found itself in a similar pickle in India!


Tango’s first Tap

Mastercard made a plea to the Delhi High Court saying it shouldn’t be paying  “equalization levy” as it has the status of a Permanent Establishment (PE) (according to the Delhi Authority of Advance Ruling of 2018) in India. And by definition the said levy has to be paid by a  non-resident service provider. And kudos! Last week the court disposed of the plea saying Mastercard does not have to pay the equalization levy. All good, right? Not quite.


Some More Sauce

Here’s the catch: it’s a tax trap for Mastercard. On one hand of the scale, it will have to pay the equalization levy with interest & penalties if it’s not considered a PE, and if it is recognized as a PE, it will still have to pay a bunch of Indian taxes, losing the benefits of the India-Singapore tax treaty.


Whatever the outcome, a lot of 👀 eyes are on this unique case – some might even say a reference case law is in making!


⚔️ France and the United States- The Tax-on-Tax Battle


The longstanding dispute between France and the United States has been focused on the payment of tax by US tech giants. The USA believes that France’s digital tax unfairly discriminates against US technology companies such as Google, Facebook, and Amazon.


Facebook earns $25 million from French operations every year. So of course France is going to push hard to overhaul digital tax rules. France claims that major tech groups are paying too little tax in the countries where they are making substantial sales. They have proposed a 3% tax rate on French revenues of such companies. This has caused Facebook to pay $125 million in back taxes to the French Government operations over a 10-year period from 2009. Moreover, FB has to pay 50% percent more tax in the current year.


Did you for a moment think that Donald Trump was going to sit quietly whilst this happened? Behold yourself… 


In retaliation, his administration has announced plans to impose taxes on $1.3 billion worth of French imports, including handbags and makeup.


⚒️ Labor Party to the rescue!


Freedom of Information Act has once again aided in revealing appalling news! Based on the analysis of the Freedom of Information query, this week the Labour Party made a huge claim by accusing the UK Government of inefficiency. It doesn’t end there. They called out the Government for collecting enormous sums of money. 15 million pounds in just 3 years to be precise. Now, 52 of England’s 224 Hospital Trusts cumulatively paid this amount through charges. These charges are infamously known as the ‘immigration skills charge’, while the Labour Party calls it ‘Stealth Tax.’ 🤫

So, what exactly are these charges? Basically, every time a company employs a foreign worker, they need to pay an additional price in the form of taxes to the government. However, the irrationality of these charges has been underlined by the Coronavirus pandemic. During these challenging times, the Health Service relied heavily on doctors and health workers from overseas. This created a spike in taxes paid and agitated the Labor Party


Finally, adhering to the pressure, the UK Government has decided to support the National Health Service Trusts by eradicating the skills charge during the pandemic.


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🥶 Pepsi, Cola, RedBull Got Zero Chill!



The 70,000 crore beverage industry (Coca-Cola, PepsiCo, Parle Agro, and Redbull) is looking at a 📉 decline of 34% in the sector, and INR 1.2k cr worth of losses are estimated for the year 2020. The IBA (Indian Beverage Association) wants the Government to remove sin-tax on aerated drinks. These drinks are placed in the 28% GST tax slab. And above that, a 12% compensation cess is levied. Moreover, IBA compares fizzy drinks to other sugar-based products such as ice-cream and chocolate 🍫 which are taxed far below.


Can this 40% tax be termed as ‘discriminatory treatment’ keeping in mind the proven health hazards cola brings with it? 


🍻 Hi, my name’s Australia. And I’m binge-drinking! Sip, slop, slop! – Crazy Tax Story



I might have trooble explaining this coz I’ve had too much to drink. I can’t talk ploply. And I’m bumping into lampposts like 🎳 pin ball. But I’m Australian, so that’s funny, right?


🏛️ Australia’s Government has used a notoriously complex web of excise and import duties, taxes, and exemptions to dip hands into the drinkers’ pockets. A typical carton of full-strength Beer is priced at A$52 with a whopping A$23 (42%) tax included. Vodka, whiskey, gin, rum and other distilled spirits (but not brandy) face an excise of A$80.41 per liter of alcohol. The excise for alcopops (ready to drinks / RTDs) was bumped up from A$39 to A$67 And so, Australians have to pay the 4th highest beer tax in the industrialized world (after Norway, Japan, and Finland) 


There are 4 different tax regimes and 2 different modes of taxation. Beer is subject to 8 different excise rates. Brandy is taxed differently. Also, some rates are indexed twice a year while others are not indexed at all. Wine is taxed at A30 cents (according to value /an ad valorem tax). Now compare this with beer (A$1) and a spirit (A$1.50). Lastly, Tennessee bourbon drinkers get tax exemptions instead of paying 5% duty.


And fortunately, the Aussies’ alcohol consumption per capita dropped by 9.7 liters in 2013-14, a 50-year low! This could prevent 190k cases of diabetes and 16k cases of cancer. And in the same year, the Commonwealth raised A$5.95B from these taxes.


Do you think this is a sobering win-win situation? 🏆



💭 Byte of the day


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