March 03, 2005

Fringe Benefit : A view from Babudom

The "left" honourable Finance Minister has been advised by the bureaucrat-babu's of his department to levy a fringe benefit tax on corporates .. and he has duly imposed it on us ... for he is an honourable man.

But let us analyse the genesis of the tax, particularly when he considers foreign travel as fringe. No doubt our babu's view "phoren" travel as a fringe benefit. Never have these babu's ever travelled abroad for any worthwhile purpose. Tax payer money has always been used by these babus to visit "phoren" countries ... but never has any such travel resulted in a dollar of exports or a dollar of investment. It is always to see how other countries work, to learn how things are over there and so forth .... By extrapolating their own honest experiences, our babus have come to the conclusion that "phoren" travel is just another name for a "holiday" paid for by the employer ... in this case the hapless Indian tax payer.

On the other hand, for global companies -- of the sort that our Indian companies are or are trying to become, foreign travel is bread and butter of our existence. In the software services arena, 95% of foreign travel results in direct billing to the customer .... without travelling abroad we cannot earn money. For other companies that think global, but pay tax locally, managers must travel around to run the business on a day to day basis. An Indian manager has to manage projects that span multiple continents. He or she just cannot afford to sit back in Calcutta or Bangalore and run the business. For them a foriegn travel is not a perk but a pain in the butt to be endured if they wish to work. But since our babus can never conceive of this they continue to think that foreign travel is a perk to be taxed ... and of course they are all honourable men.

If we extend this analogy further, pilots and flight crew of airlines that operate on international routes must be thought of enjoying the perks of "phoren" travel ... and all expenditure incurred on their behalf by the airlines must be taxed as fringe benefit. But our babu's cannot understand this and they are all honourable men ..

So how do we drive some sense into the system ? Nasscom & Co must take up this point that our global dreams would be converted into local nightmares if our babus take this extremely myopic view of fringe benefits ...

What is fringe and what is core is something that is best left to those who are in the arena. Not the bystanders of the great Indian circus. Never mind the fact that they are all honourable men.

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