UPSC Prelims Practice Questions — Musk’s offshore tax tricks likely saved Tesla hundreds of millions

Q1. Tesla reported a U.S. federal tax bill of zero for 2025. The U.S. federal corporate income tax that Tesla thus reported as nil is administered and collected by which one of the following agencies?

  • A. Internal Revenue Service (IRS)
  • B. Securities and Exchange Commission (SEC)
  • C. Federal Reserve System
  • D. Financial Crimes Enforcement Network (FinCEN)

Q2. With reference to the disclosures about Tesla's U.S. federal tax position reported in 2026, consider the following statements: 1. Tesla reported a federal tax bill of zero dollars for the year 2025. 2. Tesla has recorded a zero federal tax bill in 19 of the last 20 years. 3. Tesla's cumulative U.S. revenue over the reviewed period was about $264 billion. 4. The 2025 zero federal tax bill was the first such instance in Tesla's history. Which of the above is/are NOT correct?

  1. Tesla reported a federal tax bill of zero dollars for the year 2025.
  2. Tesla has recorded a zero federal tax bill in 19 of the last 20 years.
  3. Tesla's cumulative U.S. revenue over the reviewed period was about $264 billion.
  4. The 2025 zero federal tax bill was the first such instance in Tesla's history.
  • A. 1 and 2
  • B. 3 only
  • C. 4 only
  • D. 2 and 4

Q3. The Reuters review located Tesla's single largest pool of untaxed offshore profit — about $18 billion — in subsidiaries in the Netherlands and one other jurisdiction. That other jurisdiction, an Asian financial hub, was:

  • A. Singapore
  • B. Hong Kong
  • C. Switzerland
  • D. Ireland

Q4. The investigative review that reconstructed Tesla's offshore profit-shifting structure by examining corporate filings across 14 countries and interviewing over 20 equity analysts was carried out by which agency?

  • A. Reuters
  • B. Bloomberg
  • C. The Associated Press
  • D. Dow Jones Newswires

Q5. With reference to the OECD/G20 Base Erosion and Profit Shifting (BEPS) project, consider the following statements: 1. BEPS refers to tax-planning strategies that exploit gaps and mismatches in tax rules to shift profits. 2. The OECD/G20 BEPS Action Plan comprises 15 Actions. 3. BEPS practices are estimated to cost 100-240 billion USD in lost revenue annually. 4. The BEPS project has completely eliminated all corporate tax avoidance among participating jurisdictions. Which of the above is/are NOT correct?

  1. BEPS refers to tax-planning strategies that exploit gaps and mismatches in tax rules to shift profits.
  2. The OECD/G20 BEPS Action Plan comprises 15 Actions.
  3. BEPS practices are estimated to cost 100-240 billion USD in lost revenue annually.
  4. The BEPS project has completely eliminated all corporate tax avoidance among participating jurisdictions.
  • A. 1 and 3
  • B. 2 only
  • C. 4 only
  • D. 3 and 4

Q6. With reference to the OECD/G20 BEPS initiative, consider the following statements: 1. The 15-point BEPS Action Plan was adopted by OECD and G20 countries in 2013. 2. The finalised BEPS package of measures was published in 2015. 3. The OECD/G20 Inclusive Framework on BEPS has over 140 member countries and jurisdictions. 4. BEPS practices are estimated to erode 40-50% of global corporate income tax revenue. Which of the statements given above are correctly identified?

  1. The 15-point BEPS Action Plan was adopted by OECD and G20 countries in 2013.
  2. The finalised BEPS package of measures was published in 2015.
  3. The OECD/G20 Inclusive Framework on BEPS has over 140 member countries and jurisdictions.
  4. BEPS practices are estimated to erode 40-50% of global corporate income tax revenue.
  • A. 1, 2 and 3
  • B. 1 and 4 only
  • C. 2 and 3 only
  • D. 1, 2, 3 and 4

Q7. In the context of transfer pricing, the 'arm's length principle' requires that:

  • A. prices in transactions between associated enterprises be consistent with those that would have been agreed between independent, unrelated parties
  • B. all cross-border transactions of a group be taxed only in the country where the parent company is incorporated
  • C. multinational enterprises pay a uniform global minimum tax of 15% on all offshore profits
  • D. related enterprises pool their costs and allocate profits strictly in proportion to their employee headcount

Q8. With reference to the arm's length principle in transfer pricing, consider the following statements: 1. It is enshrined in Article 9 of the OECD Model Tax Convention on Income and on Capital. 2. The same principle also finds place in Article 9 of the UN Model Double Taxation Convention. 3. It deliberately places associated enterprises on an unequal footing so as to favour multinationals over independent firms. Which of the statements given above is/are correct?

  1. It is enshrined in Article 9 of the OECD Model Tax Convention on Income and on Capital.
  2. The same principle also finds place in Article 9 of the UN Model Double Taxation Convention.
  3. It deliberately places associated enterprises on an unequal footing so as to favour multinationals over independent firms.
  • A. 1 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q9. Under the OECD/G20 Pillar Two GloBE rules, large multinational enterprise groups are to be subject to a minimum effective corporate tax rate of what percentage in each jurisdiction where they operate?

  • A. 10%
  • B. 12.5%
  • C. 15%
  • D. 21%

Q10. India's Equalisation Levy on online advertisement services was first introduced through which one of the following legislations?

  • A. Finance Act, 2016
  • B. Finance Act, 2012
  • C. Finance Act, 2020
  • D. Finance (No.2) Act, 2024

Q11. With reference to the OECD's approach to tax havens and harmful tax practices, consider the following statements: 1. No or only nominal taxation is treated as a gateway criterion for identifying a tax haven. 2. Lack of transparency and effective exchange of information is a characteristic of a tax haven. 3. Absence of substantial economic activity is among the features the OECD examines. 4. Since May 2009, the OECD's Committee on Fiscal Affairs has steadily expanded its list of uncooperative tax havens to over fifty jurisdictions. Which of the statements given above are correctly identified?

  1. No or only nominal taxation is treated as a gateway criterion for identifying a tax haven.
  2. Lack of transparency and effective exchange of information is a characteristic of a tax haven.
  3. Absence of substantial economic activity is among the features the OECD examines.
  4. Since May 2009, the OECD's Committee on Fiscal Affairs has steadily expanded its list of uncooperative tax havens to over fifty jurisdictions.
  • A. 1, 2 and 3
  • B. 1, 2 and 4
  • C. 3 and 4 only
  • D. 1, 2, 3 and 4

Q12. As of 2025, the operations of Tesla, Inc. are described as comprising how many main business segments?

  • A. Two
  • B. Three
  • C. Four
  • D. Five