Indian tax authorities have ordered Aviva’s local unit to pay $7.5 million in back taxes and penalties after an investigation found that the company had created fake invoices to pay illegal commissions and claimed incorrect tax credits. The investigation revealed that Aviva India paid $26 million to vendors who were allegedly just a front to provide marketing services, but in reality, they were used to give agents unauthorized commissions. The company evaded $5.2 million in taxes by using a fake system of invoices and cash payments. Authorities have alleged that Aviva’s India unit used a schema to get bogus tax credits, and the move had a significant impact on the company’s business, which recorded a profit of only $10 million in the 2023-24 financial year.
Aviva India has denied wrongdoing and plans to contest the order through an appeal. The company has stated that the order will not impact its operations. However, the tax authorities claim that the company’s actions were intentional and that the vendors were merely puppets used to conceal the company’s nefarious activities.
The investigation, which began in 2020, alleges that Aviva’s transactions were designed to circumvent regulatory limits on agent commissions. The company allegedly hired “agent mentors” to train sales agents, who would then issue fake invoices to the company to facilitate excess commissions. The tax authorities have also presented screenshots of emails and messages between Aviva executives and insurance distributors, discussing ways to skirt compensation regulations using fake invoices.
Aviva’s India business is a joint venture with Dabur Invest, with Aviva holding 74% stake. The company’s operations in India face stiff competition from local and international insurers, making it essential for the company to grow its business. However, the tax authorities’ findings have cast a shadow over the company’s reputation and its ability to operate in the highly competitive Indian insurance market.