The Hindu Business Line : `Fringe benefits levy will tell on corporate tax'

Mr R. Bupathy, former President, ICAI, with Mr R. Anand, Vice-President-Corporate Affairs, Sundaram Finance, at a post-Budget panel discussion with management students of St. Joseph's College of Engineering, Sholinganallur near Chennai on Tuesday. — Shaju John

Chennai , March 22

THE fringe benefit tax (FBT), a levy on perquisites introduced in this year's Budget, will, along with education cess, surcharge and lower depreciation rates, increase the effective rate of corporate tax though the nominal rate has been slashed by 5 per cent.

Mr R. Anand, Vice-President, Sundaram Finance, said this while addressing students of the Department of Management, St Joseph's College of Engineering, at a BL Club post-Budget discussion on Tuesday.

The tax, however, should be discussed in the light of the growing importance of perks in today's world, he said. By taxing the employer, and not the employees, the Government is also backing the philosophy of a wholesale form of a tax, evident in earlier levies such as the dividend tax.

Mr R. Bupathy, former President of the Institute of Chartered Accountants of India, said the multi-rate FBT is complex, and instead simpler alternatives could be pursued. He agreed with Mr Anand that industry would find the FBT difficult to digest.

On the 0.1-per cent tax on withdrawals in excess of Rs 10,000, Mr Bupathy said he believed the Finance Minister had imposed it so that high-value transactions could leave a trail, and not for raking in revenue.

He said the banking transaction tax could pose practical difficulties, besides increasing bank transactions, workload and procedural compliance to collect and pay tax.

Regarding service tax, he said instead of targeting a whole lot of services, the Government could focus on the top five revenue contributors: telephone, insurance, port services, banking and advertisements.

Both the speakers welcomed proposals to implement the value-added tax (VAT) regime, and said it could prove to be simpler and more efficient when it is fully rolled out.

Earlier, Mr D. Sampath Kumar, Associate Editor, Business Line, said the Budget has over the years become "less and less of a strategic vision document."

"The charm of the Budget has gone," he said, because most of what is to be spent has already been committed. For instance, interest payments, staff salaries, pensions and capital expenditure on defence account for about half of the Rs 5-lakh crore to be spent this year. There is also very little in terms of concrete points of action, he said.

The presentation on the Budget was followed by a lively question-and-answer session with the students who quizzed the panel on various aspects of the Budget, ranging from service tax to higher defence outlays.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page