Tax experts criticise FBT
The controversial fringe benefit tax came in for scathing attack from experts on Friday with many terming it a "hasty process of legislation without any understanding" and "irrational taxation with totally unexplainable clauses."
By PTI |
CHENNAI: The controversial fringe benefit tax (FBT), introduced in the Union Budget, came in for scathing attack from experts on Friday with many terming it a "hasty process of legislation without any understanding" and "irrational taxation with totally unexplainable clauses."
"The Finance Minister (P Chidambaram) had said the FBT was not a new form of taxation. It is one of the blatant lies that you could come across," V Ranganathan, member, general committee, Madras Chamber of Commerce & Industry (MCCI) said, speaking at a seminar on `FBT - Rules & Implications'.
Going further, he said that FBT was a hasty process of legislation and it was announced without any debate or understanding. "No meaningful discussion had taken place before implementing the FBT," Ranganathan, who is also partner, Ernst & Young, said.
FBT, which was aimed at taxing the collective benefits of employees, would also end up taxing superannuation benefits, he said. "Superannuation is the most water tight form of retirement benefits. Taxing this is totally unexplainable and shows the total misunderstanding of the concept," he said.
K R Sekar, partner, Deloitte Haskins & Sells, said genuine expenditure of companies was being taxed under the FBT. For instance, the telephone bills would come under FBT though it was a genuine expenditure for many call centre firms and other companies, Sekar said.
Arun Nalavadi, chairman, FBT Committee, said the cost of collection and the cost of compliance of the FBT would be higher and it would nullify the total increase in the government's revenue through the FBT.
Responding to the criticisms, Arbind Modi, joint secretary, Central Board of Direct Taxes (CBDT), admitted that more transparency was required in taxation policies. He, however, denied the allegation that FBT was a new form of taxation. "Taxing fringe benefit is not new. It is always taxable on the employee," he said.
Modi also said that the considerable amount of discussions was held by the Finance Ministry with all stakeholders before finalising various tax proposals. Further, on the FBT itself, the government had made various changes in the FBT to "soften" the tax implications.
"Considerable softening of the FBT has been done," he said.
"The Finance Minister (P Chidambaram) had said the FBT was not a new form of taxation. It is one of the blatant lies that you could come across," V Ranganathan, member, general committee, Madras Chamber of Commerce & Industry (MCCI) said, speaking at a seminar on `FBT - Rules & Implications'.
Going further, he said that FBT was a hasty process of legislation and it was announced without any debate or understanding. "No meaningful discussion had taken place before implementing the FBT," Ranganathan, who is also partner, Ernst & Young, said.
FBT, which was aimed at taxing the collective benefits of employees, would also end up taxing superannuation benefits, he said. "Superannuation is the most water tight form of retirement benefits. Taxing this is totally unexplainable and shows the total misunderstanding of the concept," he said.
K R Sekar, partner, Deloitte Haskins & Sells, said genuine expenditure of companies was being taxed under the FBT. For instance, the telephone bills would come under FBT though it was a genuine expenditure for many call centre firms and other companies, Sekar said.
Arun Nalavadi, chairman, FBT Committee, said the cost of collection and the cost of compliance of the FBT would be higher and it would nullify the total increase in the government's revenue through the FBT.
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Responding to the criticisms, Arbind Modi, joint secretary, Central Board of Direct Taxes (CBDT), admitted that more transparency was required in taxation policies. He, however, denied the allegation that FBT was a new form of taxation. "Taxing fringe benefit is not new. It is always taxable on the employee," he said.
Modi also said that the considerable amount of discussions was held by the Finance Ministry with all stakeholders before finalising various tax proposals. Further, on the FBT itself, the government had made various changes in the FBT to "soften" the tax implications.
"Considerable softening of the FBT has been done," he said.
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