FBT, withdrawal tax draw flak

and the Bombay Management Association in Mumbai today, the clear verdict by the audience was that nobody likes the fringe benefits tax (FBT) and the cash withdrawal tax.

The proceedings started on a light note. Stock broker Rakesh Jhunjhunwala received huge applause when he was introduced as "the man who drives the stock market in the morning and afternoon."

The field was then left open to the advisor to the finance minister, who first listed the Budget's goals and then defended the government with great skill and wit. However, the audience was in no mood to buy his arguments.

R Gopalakrishnan, executive director, Tata Sons, stole the show with his unparalleled oratory and sense of humour. He pointed that only four countries in the world--Australia, New Zealand, Lesotho and Malawi-- have introduced FBT.

"And the total population of these countries would be equal to that of Mumbai and Thane," he said amidst laughter. "I have no objection if that is the kind of club we want to be associated with," he added.

Gopalakrishnan also touched an emotional chord when he said that the fringe benefits tax would mean that companies would no longer be able to build townships like Jamshedpur and Bhilai.

He said that in a country where social security is absent, taxing companies for providing benefits to their workers was unfortunate.

He also suggested that the finance minister should reintroduce the Action Taken Report, which measured what had been achieved against the promises made in previous Budgets.

He pointed out that the government should have a vision and a road map, something akin to the "strategic intent" that is present in the corporate sector.

Sumant Sinha, chief financial officer of the Aditya Birla group, said there were no significant announcements in the Budget. "In short, the Budget was a good incrementalist budget," he said. He said that it looked as if the government intended to work behind the scenes on reform proposals rather than announce them in the Budget.

Rakesh Jhunjhunwala said the Budget "missed the bus" by not announcing any measures on labour reforms and not taking any step to speed up legislation on reform measures.

"Unfortunately, the government, which ever is in power, protects organised labour. This, in turn, hurts unorganised labour," he said, adding that no Budget could stop India's growth momentum.

But to Jhunjhunwala's poignant plea that he should be allowed to withdraw cash without his wife knowing to take his girlfriend out without paying a cash withdrawal tax, Shome advised him to get a credit card with his office address. The hall erupted with laughter.

The discussion became warmer when the audience started asking questions. Ajit Gulabchand, chairman and managing director of Hindustan Construction Company Ltd, pointed to the difficulties faced by construction companies that had to provide benefits to their employees to induce them to work in remote parts of the country.

S V Prasad, CEO, Birla Mutual Fund, said that there were double standards for government servants and private sector employees so far as the FBT is concerned. Several members in the audience pointed out that senior citizens were adversely affected by the Budget.

Others pointed to anomalies in the Budget fine print, such as taxes on superannuation contributions.

But Gopalakrishnan had the last word. While accepting the memento gifted to him, he asked whether it would be taxed as a fringe benefit.