I am not an economist so probably don't understand the logic of having Fringe Benefit Tax the way it has been planned. I have heard numerous interviews now of various Finance functionaries and the Finance Minister himself and have yet not got convinced of the need.
The last argument given is that it only adds a max of 1% to 1.5% additional tax to all organisations, so they should not complain about it.
My understanding why this tax has come into being is to generate revenue for the Government's expenditure. So the corporates have to pay this money this way or the other.
To me a simple solution staring at me is that the corporate rate of taxation be made 31.5% instead of 30 and do away with the FBT. This is equivalent to what the corporate would in any case pay to the Government and will cover the fringe benefits that are provided by various employers. I am sure most corporates would be happier paying the additional tax in lieu of FBT. And just to make the Government happy we can call the additional tax as the Fringe Benefit Cess (just to cater to the emotional attachment the finance ministry has to the term Fringe benefits).
But then I guess you would have to be a brilliant economist to ignore such simple logical solution. Lets raise a toast to simplifying our tax structure with an official tag line of "Nothing simple about it".........
2 comments:
Brilliant idea to get the same outcome. But then I suppose even a Harvard Business School graduate can succumb to the system. Babudom rules!
I guess in the end it has to do with a person's ego and stubbornness. Despite representations by all associations representing the business community in India and suggestions like the one mentioned here, the FM did not budge. As a CA I can assure you that the paperwork invoved is going to increase manifold - other than the HR compensation issues that this raises !
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