Friday, April 27, 2007

Piercing the glass ceiling (Law Street in The Economic Times, April 2007)

Well folks, here is another column. It was written with a long sabbatical in mind. Unfortunately, this ain't happening. This means, you can look forward to another column next month - there is always a silver lining somewhere (or so I hope to think). I hope my readers agree.

The url is here or as always the column is cut and pasted below for your reading pleasure.

Piercing the glass ceiling
Law street/Lubna Kably
April 27, 2007

The time has come, the Walrus said, to talk of many things. With Zenobia Aunty off on a long well deserved sabbatical, I am taking help from the Walrus. Yes, the very same one that spoke to Alice, in Through the Looking Glass. The animal kingdom is as talkative as us, what is more, they seem to know all about tax blogs. Perhaps Dr Dolittle helps them. Enough of talk about books and movies, admonishes the Walrus and commands me to get down to serious business — of typing this monthly column.

Now James Edward Maule, a US-based professor and taxpayer has an interesting blog called, ‘Mauledagain’. He reports recently of a CNN article which points out that not many people knew much about taxes. According to the IRS only 40% or so of the taxpayers eligible for telephone tax refund (see Law Street: ET, February 27) are claiming it. Two thirds did not know the value of child credit and fewer than half were familiar with alternative minimum tax. (Yes, unlike India, AMT is applicable to individuals as well, here only corporate entities find themselves on the MAT). According to the learned professor, the cause of ignorance is a combination of several factors. One is the lack of tax education (he advocates a basic tax education in schools). Another is a reluctance of citizens to educate themselves about taxation and lastly the complexity of tax laws, seasoned with constant changes. He quotes that this “prevents even those who want to learn and understand tax from getting enough time to let things sink into their brains.”

Drawing on this the Walrus has a solution for garnering more tax revenues in India. No, it does not mean more tax. Introduce coaching classes or touch button systems in hi-tech cities. Classes must run at prime locations — railway stations, bus terminus, shopping malls, where people get to know what a tax return looks like, what form they must use, how they should file their return. Besides, introduce a system where tax returns are collected at every post office, every bank counter. I know, many people are so scared of the word tax. They rather not file their return. Coaching classes will help. The Walrus ends his long speech. I dare not comment on whether this is a ‘hare brained’ scheme or not. But I do believe that education on the tax regime will help, perhaps through voluntary clinics, proper print advertisements, helpful brochures and even an interactive web demo. It should actually teach people how to file their own tax return — I hear a simple one is around the corner, one prepared with the help of a reputed educational institution.

Hare brained, squeaks a voice and I spot the March Hare. “You should say what you mean”, he tells me. “I do, at least, I mean what I say,” I reply trying to remember Alice’s exact words. “That’s the same thing you know” I add. “No, it isn’t,” says the March Hare. This time, I do not need to turn to the Walrus for better understanding. I am so sure the March Hare is referring to the scheme of bringing ESOP under the tax ambit. True, top hi-flyers have amassed ESOPs and have minted a fortune on sale of shares by paying a marginal STT and nil capital gains tax. Yet, what is FBT all about? The Walrus recalls, the Finance Bill, 2005, ushered in FBT with the intention to tax perquisites enjoyed collectively by employees that escaped taxation altogether or were subject to reduced taxation. ESOPs are not collective benefits; in fact, they may not even be enjoyed by all employees. FBT on ESOPs, it just isn’t cricket.

I looked around to see whether a cricket would now appear from somewhere or perhaps Sachin would be swinging his bat. Instead, there came the Dormouse. I was surprised to see him alive. Hadn’t an attempt been made to drown him in the tea pot or some such thing? He had just returned from London, hoping to meet the Queen but Shilpa Shetty beat him to that.

Back home, there was some talk of a higher tax or cess or whatever to be paid by domestic flayers during peak time. Fortunately, this idea was shelved. But, in London, wheezed the Dormouse, they are introducing a green tax, if they haven’t introduced it already. Millions of people who fly abroad every year are to be taxed on the number of miles they travel. Passengers would be issued with a green miles allowance and forced to pay more if they took extra flights. Other options include putting VAT or fuel duty on flights within the UK or a per flight tax on airlines. All this world tax news is getting a bit too much for me. Now before the Mad Hatter turns up and joins the party and adds his thoughts, I think I shall join my Zenobia Aunty for a much needed sabbatical.

(The author is a CA. Views are personal.)

1 comment:

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