Investment in tax haven jurisdiction by Indian MNCs: a conceptual study

Abstract

PurposeThis study aims to understand the investments made by Indian MNCs in different tax havens to optimize their tax liabilities. The study also aims to provide insights into the conceptual framework of such practices, highlighting potential benefits and risks and providing policy recommendations that promote transparency, fairness and sustainable economic practices.Design/methodology/approachThe study involves a combination of quantitative and qualitative approaches. The quantitative aspect analyzes investments made by Nifty 50 companies in tax haven jurisdictions from the financial data of the parent company from 2019 to 2023. The qualitative aspect involves a conceptual framework developed from previous studies and examining the role of various organizations in combating tax avoidance. This mixed-method approach enables a comprehensive understanding of the motivations, impacts and regulatory responses related to the use of tax havens.FindingsThe paper provides conceptual and descriptive insights on investments made by Indian MNCs in tax havens during 2019–21 to save tax. The study suggests that while investing in tax havens, businesses give more priority to ease of doing business and other considerations such as a lower tax rate.Research limitations/implicationsThe present study suggests policymakers about the effectiveness of current tax laws and their enforcement, highlighting loopholes and potential avenues for modification.Originality/valueThis paper assesses the reasons for Indian MNCs starting subsidiaries and making investments in different tax haven jurisdictions and suggests appropriate measures to avoid the menace of tax havens.