The Hindu Business Line : Fringe benefits from Down Under

MORE as a cop than a casual observer, Chidambaram has been watching how companies keep employees happy. What did he find? That many perquisites are disguised as fringe benefits and that nobody pays any tax on these. Therefore, he made one fell sweep at such perks with a tax, and said: "The tax is not new, although I am obliged to call it by a new name - Fringe Benefits Tax (FBT)."

Interestingly, the name is not new because the Australian Tax Office (www.ato.gov.au) has such a tax.

"One of the most common fringe benefits is a car, which generally becomes a fringe benefit when it is owned or leased by an employer and made available for the private use of an employee. If the employer's car is garaged at an employee's house, it is treated as having been made available for private use," says the site.

Down Under, other `common fringe benefits' include "expense payments, loans, meals/entertainment, and housing." But on valuation of car as a perquisite, there are already elaborate rules in the Indian tax law.

The Australian tax regime exempts from FBT "laptop computers (one per year per employee), mobile phones primarily used in employment, most minor benefits valued at less than $100, some taxi travel, and in-house health care facilities." Which is where you would find the new proposals of the FM as being stingy.

New Zealand too has such a name for a tax. The glossary on www.ird.govt.nz defines fringe benefit as "a non-cash benefit provided to an employee or an associated person".

It also explains FBICR as fringe benefit-inclusive cash remuneration, that is, the taxable value of attributed fringe benefits plus the net cash remuneration.

An example on the site reads thus: "Four employees had the private use of a car during the quarter (where the employer, Jane Bloggs Ltd, is filing a quarterly FBT return). Two of these employees had the car for 27 days each; and two of these employees had the car for 16 days each."

Well, that's already going beyond the maximum number of days in any month, perhaps because anything can happen on the fringe. But read on: "As no one employee had the principal use of the fringe benefit, Jane Bloggs Ltd treats it as a shared vehicle. However, if one of the four employees had greater use of the car, the company would attribute the whole benefit to that employee." For computations such as this, you may need a rocket scientist!

Back home, the Finance Bill that has come piggybacking on Chidambaram's Budget 2005 includes a troublesome new section strangely numbered 115WB, as if to please the Left.

It contains the definition of `fringe benefits' as "any privilege, service, facility or amenity, directly or indirectly, provided by an employer to his employees (including former employee or employees) by reason of their employment; or any reimbursement, directly or indirectly, made by the employer to his employees for any purpose; any free or concessional ticket provided by the employer for private journeys of the employees and their family members; and any contribution by the employer to an approved superannuation fund." In short, anything called by any name!

What's draconian is that any expense/payment for entertainment, festival celebrations, gifts, use of club facilities, provision of hospitality of every kind by the employer to any person, maintenance of any accommodation in the nature of guest house, conference, employee welfare, use of health club, sports and similar facilities, sales promotion including publicity, conveyance, tour and travel including foreign travel, hotel, boarding and lodging, repair, running and maintenance of motorcars, repair, running and maintenance of aircrafts, consumption of fuel other than industrial fuel, use of telephone, and scholarship to the children of the employees will be deemed to be fringe benefit.

These are to be valued at different percentages as specified. And Section 115WC is on valuation of fringe benefits. Appropriately named, I'd say, again.

ExParte@TheHindu.co.in

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