taxed);

The argument advanced by the influential Adviser to Finance Minister, Mr Parthasarathi Shome, in favour of the fringe benefits tax is that it corrects the current infirmity in taxation of perquisites.

As is well-known, perquisites are normally taxed in the hands of the employee. He feels that perquisites escape the tax net to a substantial extent, in the sense that those employees, who receive collective corporate perquisites and are not taxed thereon are, therefore, treated more favourably than those employees who are taxed individually. Hence, the alleged justification for the fringe benefits tax at the corporate level.

It must be conceded that even given the limited protests, the impact of the FBT has not yet fully sunk in the corporate consciousness or to that of employees' associations.

FBT can be the beginning of a new licence and permit raj, involving corporates in efforts to justify to the taxmen every piece of travel, entertainment, sales promotion and employee amenity.

In this day and age, when Indian companies are going global, they have to provide competitive terms of employment to their export on global terms.

To penalise firms by an extra 30 per cent tax on the provision of what are globally considered essential amenities, such as club facilities, telephones and so on seems to be a confession of failure to understand the implications of liberalisation. Or is it a case of jealousy of the better terms of employment in the modern sector of information technology?

I will be labouring the obvious when I point out that it is pernicious to tax sales promotion or travel or entertainment to mention only three significant categories.

Do we expect the tax official to sit in judgment over whether a particular sales promotion effort is a legitimate expenditure or a fringe benefit?

So too, with travel. With the FBT, we will be introducing a P-form type of regulation even for domestic travel, leave alone foreign travel.

In these days, when business executives have to travel abroad at short notice, the tax official may question the need for the same.

Anyway, the Finance Minister's fringe benefits proposal finally boils down to extending tax collectors' control over what are management decisions of business executives.

By all means, let the Finance Ministry try to impose a better control over taxation of perquisites in the hands of recipients. This can be done in a better way than a fringe benefit tax.

Every corporate will have a calculation of cost to company of the perquisite it gives its employees.

The simplest method of checking taxpayers' compliance is to compare the total of such costs to companies with the perquisites offered for tax purposes by the employer. Where there is difference, it can be recovered.

The FBT seems to be a futile effort aimed at taxing, among other things, employee welfare services such as sports facilities and holiday homes. I concede that the word "guest-house" is a red rag to the tax official. But guest-houses are common even in tax departments, leave alone banks and PSUs.

These days, guest-houses are useful, especially when hotels are often over-full and highly expensive.

Surely, while making the proposal to tax maintenance of guest-houses, the Minister does not want to cut down travel by managers for business. This is penny-pinching with a vengeance.

Stationary executives may, in the current competitive world, mean a stagnant economy. At the least, the tax system should not put fetters on the enterprise of individual managers, even as it tries to increase tax collections.

The other PC virus of which Mr Goswami writes is the one concerning the cash transaction tax. This is ostensibly intended to keep a trail on black money.

Whether the Finance Minister can succeed in his objective of obtaining a trail of cash withdrawals above Rs 10,000 at a time and use the trail to control the spread of black money is still a matter of technology and, hence, of debate.

But, at the outset, some practical problems have been posed, keeping in view the fact that in India most wages for labour in the rural areas and construction labour in urban areas are paid in cash. Further, there is need for cash even for remittances of certain statutory payments.

Above all, we must recognise that the banking system has still not spread out sufficiently and in a customer-friendly manner so as to make cheque payment universally popular. So, limiting withdrawals by individuals to Rs 10,000 or imposing a tax thereon, however small, will not be a useful initiative.

Withdrawals will continue to be made in spite of this tax. Tracing them to their final use will, however, be difficult, even if banks can cope with the job of maintaining the trail to the initial withdrawal.

Hopefully, Mr Chidambaram will actively listen to grievances both from corporates and the personal tax-payers.

The implications of his far-reaching tax reforms are life- threatening to the very vibrancy of the economy that the Budget and the Government policies as a whole seek to promote.

It behoves the Finance Minister, in keeping with his tradition of liberalism and open-mindedness, to be responsive to the concerns expressed in this regard. Rollback per se is not a dirty word, and Mr Chidambaram should not fight shy of it if he is to leave the statute book uncluttered by reactionary pieces of legislation that do more harm than good and end up producing doubtful revenue benefits and reduction in tax evasion.

A good Budget on the whole deserves to be topped up by a cleaning-up exercise, even if it involves the giving up of a few hobby-horses high on expert advisers' lists. Ego should not stand in the way of rationality.

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