May 9, 2005

FBT - Not directed at big businesses?

One of my friends has a theory.

The theory goes something like this.

Finance Minister P.Chidambaram's Fringe Benefit Tax (which kicked up a huge controversy) is not actually aimed at small, medium or even large businesses.

He actually has the tax gun trained on the huge number of free lance consultants and professionals who have so far been using tax loopholes to sometimes not pay any tax ! They have been doing that by claiming personal expenses as business expenses and showing overall losses !

Now, I wonder if that is true!

1 comment:

  1. I hope he had done some general reading, in which case he would have learned of the saying "cutting off one's nose to spite one's face" or "throwing off the baby with the bath-water"
    The impact of this move, both in terms of direct costs, as well as indirect costs will be huge for Indian industry, and I am not taking into account the damping effect it will have on the economy due to reduction in the expenditures on travel, entertainment etc. An example of the foolishness of this tax is that it penalises the BPO industry, which has a huge expense on travel due to the need to provide transport for their employees, something that is done only because the government is unwilling to exert itself to provide a proper public transport infrastructure for industry, as well as outdated labor laws that require employers to provide transport for women who are required to work the evening or night shifts. So first you make BPO's spend on providing transport and then you tax BPO's for the same! The world is moving to a lower tax-regime, our government is increasing taxes! If Chidambaram is so keen on ensuring that no one misuses tax-loopholes, why does he not start levying income-tax on farm income?

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