Reading Comprehension – Test 102

Read the following passage carefully and choose the most appropriate answer to the questions out of five alternatives.<br><br> What does this imply for GDP estimation? Apparently, quite a lot since they are part of the universe of active companies for which GDP is estimated. Though it may not be possible to show how much difference it would make to the GDP level and growth rate (in the absence of more information), the survey findings could bring down the growth estimates. <br><br> However, those knowledgeable have dismissed such an apprehension on two counts: one, shell companies add value to the economy, hence their deletion would underestimate GDP; two, as all active companies are said to submit their audited accounts at least once in three years, the contribution of shell companies is well captured in the MCA database. <br><br> Both arguments seem questionable. Shell companies, by definition, do not produce goods and services; they help the promoter/owner to hide profits or evade taxes/regulation. A dictionary meaning of a shell company is "a company existing as a legal entity but having no significant assets, independent business operations, etc., often owned or controlled by another company and used for various, often illegal purposes". <br><br> The argument that all active companies under the MCA have filed statutory returns at least once during the last three years is a bureaucratic fiction. If it were true, there would be at least one year for which there would exist data for seven-eight lakh companies, which has never been the case. In reality for most years data are available for around three lakh active companies, estimates for which are inflated (or multiplied) for the (fictitious) universe of about 10 lakh active companies. As the database is not made public and the methodological details are not adequately revealed, there is no way of verifying the veracity of the official estimates - an issue critics have flagged since 2015. <br><br> If the share of shell/fake/bogus companies in the universe of active companies in the MCA-21 database is as high as what is found in the NSSO's services sector survey, then GDP estimates based on a more realistic list of working companies are likely to be smaller. Hence this could affect the corporate sector's GDP level and its growth rate.

Which of the following is false regarding shell companies?

Read the following passage carefully and choose the most appropriate answer to the questions out of five alternatives.<br><br> What does this imply for GDP estimation? Apparently, quite a lot since they are part of the universe of active companies for which GDP is estimated. Though it may not be possible to show how much difference it would make to the GDP level and growth rate (in the absence of more information), the survey findings could bring down the growth estimates. <br><br> However, those knowledgeable have dismissed such an apprehension on two counts: one, shell companies add value to the economy, hence their deletion would underestimate GDP; two, as all active companies are said to submit their audited accounts at least once in three years, the contribution of shell companies is well captured in the MCA database. <br><br> Both arguments seem questionable. Shell companies, by definition, do not produce goods and services; they help the promoter/owner to hide profits or evade taxes/regulation. A dictionary meaning of a shell company is "a company existing as a legal entity but having no significant assets, independent business operations, etc., often owned or controlled by another company and used for various, often illegal purposes". <br><br> The argument that all active companies under the MCA have filed statutory returns at least once during the last three years is a bureaucratic fiction. If it were true, there would be at least one year for which there would exist data for seven-eight lakh companies, which has never been the case. In reality for most years data are available for around three lakh active companies, estimates for which are inflated (or multiplied) for the (fictitious) universe of about 10 lakh active companies. As the database is not made public and the methodological details are not adequately revealed, there is no way of verifying the veracity of the official estimates - an issue critics have flagged since 2015. <br><br> If the share of shell/fake/bogus companies in the universe of active companies in the MCA-21 database is as high as what is found in the NSSO's services sector survey, then GDP estimates based on a more realistic list of working companies are likely to be smaller. Hence this could affect the corporate sector's GDP level and its growth rate.

A shell company is used for -<br> Illicit activities <br> Eluding taxes <br> Improving GDP

Read the following passage carefully and choose the most appropriate answer to the questions out of five alternatives.<br><br> What does this imply for GDP estimation? Apparently, quite a lot since they are part of the universe of active companies for which GDP is estimated. Though it may not be possible to show how much difference it would make to the GDP level and growth rate (in the absence of more information), the survey findings could bring down the growth estimates. <br><br> However, those knowledgeable have dismissed such an apprehension on two counts: one, shell companies add value to the economy, hence their deletion would underestimate GDP; two, as all active companies are said to submit their audited accounts at least once in three years, the contribution of shell companies is well captured in the MCA database. <br><br> Both arguments seem questionable. Shell companies, by definition, do not produce goods and services; they help the promoter/owner to hide profits or evade taxes/regulation. A dictionary meaning of a shell company is "a company existing as a legal entity but having no significant assets, independent business operations, etc., often owned or controlled by another company and used for various, often illegal purposes". <br><br> The argument that all active companies under the MCA have filed statutory returns at least once during the last three years is a bureaucratic fiction. If it were true, there would be at least one year for which there would exist data for seven-eight lakh companies, which has never been the case. In reality for most years data are available for around three lakh active companies, estimates for which are inflated (or multiplied) for the (fictitious) universe of about 10 lakh active companies. As the database is not made public and the methodological details are not adequately revealed, there is no way of verifying the veracity of the official estimates - an issue critics have flagged since 2015. <br><br> If the share of shell/fake/bogus companies in the universe of active companies in the MCA-21 database is as high as what is found in the NSSO's services sector survey, then GDP estimates based on a more realistic list of working companies are likely to be smaller. Hence this could affect the corporate sector's GDP level and its growth rate.

Which of the following is true regarding the passage?