The Hindu : Business : CEOs favour FBT abolition

Online edition of India's National Newspaper
Tuesday, Nov 27, 2007
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Business

CEOs favour FBT abolition

Special Correspondent

‘Remove surcharge on corporate tax’

NEW DELHI: A vast majority of corporate honchos has urged the Finance Minister to abolish Fringe Benefit Tax (FBT) on normal business expenses such as sales promotion, travel and gifts to customers in his forthcoming budget proposals.

Nearly 80 per cent of over 400 Chief Executive Officers (CEOs) and Managing Directors (MDs) of premier industrial sectors, who took part in the Assocham’s survey expressed the view that the tax should not exist as these expenses do not have any element of disguised perquisites to employees. They asserted that gifts to customers was a common practice and employees do not derive any benefit and said that it, therefore, no longer made an economic sense to continue to subject employers to FBT on such expenses.

According to the survey, the distribution of gifts is prevalent in industries like garment, white goods, FMCG, small accessories and automobile, whose margins are reeling under pressure due to rupee appreciation, and removal of FBT on sales promotion expenses will provide them a great relief.

“Likewise, subjecting FBT on dealer meetings conducted by various business promoters to discuss business strategies should also not be subjected to FBT,” said Assocham President, Venugopal Dhoot.

Fifty-five per cent of respondents said that the surcharge on corporate tax, which is 2.5 per cent now, should be abolished and 30 per cent corporate tax rate imposition should continue.

Similarly, 60 per cent of the CEOs feel that their annual turnover could be taxed to the extent of one per cent, provided FBT was abolished on identified and suggested expenses and money generated out of it be used for irrigation purposes.

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