Every so often, a slickly packaged press note on a new toilet is kissed and massaged into a front-page “special” on the Corporate Social Responsibility of our IT giants. A few publicity crumbs thrown in public—jackets for the traffic policeman, sponsored sign boards—are hailed as signs of the bountiful munificence of the kaptaans of the knowledge economy. But what after the OB vans leave the campus?
Sheikh Ahmed Ali, the Hyderabad correspondent of CNN-IBN, has just reported that of the over 1,400 IT companies in that City, only four—0.28 per cent—have made it to the list of top-100 tax-payers of the income-tax department. And their overall contribution to the exchequer through income tax is less than half a percent—yes, 0.5 per cent—of what other companies have paid.
Hyderabad’s top-100 companies have made an advance tax payment of Rs 3,486 crore. But the total contribution of the four IT companies is just Rs 10 crore and the highest income tax payment by any of the four is a mere Rs 3.5 crore. Interestingly, the billion-dollar company Satyam Computers, is not on the list of IT payees. Its contribution is only through the tax deducted at source (TDS) that it collects from its employees and vendors.
In stark contrast, are the unsung non-IT companies and individuals. Matrix Labs CEO N. Prasad has emerged as the individual highest tax-payer by paying Rs 26.04 crore. Similarly, with a payment of Rs 1,184 crore, the National Mineral Development Corporation (NMDC) has become the highest tax payer for the year 2006-07.
Of course, it’s cruel to pile on the IT companies because they are only reaping the benefit of the tax exemptions that the sector enjoys. Of course, it’s not right to think that all IT companies are raking in the moolah in the way the big-five do. And, of course, visionary that he is, N.R. Narayana Murthy has always advocated that companies which can afford to pay should be allowed to pay?
But holier-than-thou?
The only two things certain in life, they say, is death and taxes. For a lucky few, only one of them, it seems, is certain.
The time is NOW to stop the concessions. The Govt should provide incentives to innovation companies and not to code-writting companies. Also the land and other requirements for innovation companies will be less vis-a-vis the coding factories that employ thousands.
A co as big as Satyam remitting only TDS from employees and vendors just shows the kind of mentality.
Wow,
A great post and writeup. We should email this to all CEO’s and ask for their responses. High time all the tax sops go for these guys and they play a level game.
Churumuri praising NRN as a visionary?!?! Wow, thats news !!
@Au-star, do u know about something called as ‘Sarcasm’ read more here
http://dictionary.reference.com/browse/sarcasm
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Tax what Infy claims to pay is mandatory pay roll tax it ends up paying in USA. So if NRN thumps his chest saying his effective tax rate is around 12% ask him to give details. His effective tax rate in India is still zero only..INFY is no better. But because it has major international operations in US and it is statutatorily bound to pay payroll taxes its tax figures look respectable.. That NRN is cunning and crafty.. He pays no tax in India, he pays no tax in US and they shows the payroll taxes as income tax !!! For those who do not know about payroll taxes– they are like employer’s contribution to provident fund …Do you get the craftiness of NRN now?
Is not this the same case with SEZs?
They get land cheap, no sales taxes, no property tax… and they wriggle out paying majority of income tax quasi-legally…
What would the land-owner, peasant get from these deals finally?
Even a small peTTige angaDi in a remote corner of the city gets a good sum as good will when it is sold, what do these farmers get!?
They made those lands habitable, toiling hard for centuries, what do they get in return!?
A golden kick in the rear?
How many years would a 6 lakhs last for them?
Even if they are employed in those ghettos, what would they be hired as?
As domestic helps(bais, ammas…), malis, hamalis… what about their expertise!?
Any how, this will be an awesome test of “law of Karma’, it has to be seen if Kali Yuga’s instant delivery of justice, really works or not!
PS: Does any one know whether Tata and Sons still follow their old principle “not to save any tax”?
….and here we go again with another round of IT/NRN bashing.
GK3S
I don’t think so. Narayana poses some awkward questions about NRN’s holiness. Can you refute what he has been saying?
Why shouldn’t I bash NRN? Have IT companies stopped asking government for concessions. They want concessions to continue beyond 2018. They give lectures in US universities that they succeeded in spite of Indian government and not because of Indian government ( They sight lack of infrastructure for the apathy Indian government has for general industry and they get clapped for succeeding despite such a government ).
Tax exemption have been a one of the several factors why IT industry took up in India. NRN too made off through this route.. and then sau chua khane ka baad bili chali haz. I felt like vomiting when NRN made this statement paraphrased in bracket ( “IT companies pay Income Tax to the government and their employees spend a major portion of their income in the place they live. We have paid for it. Nobody is doing anybody a favour,”) Refer this news item http://news.oneindia.in/2007/04/08/make-forceful-argument-cauvery-narayan-murthy.html
This is a bogus statement. You can refer INFY’s own balance sheet ( I do not remember figures.. you can refer muthry4prez .. nearly 99% of revenues in India are exempted from Income tax ) Whose income tax does Murthy Angadi pay? Why is it trying to project wrong picture. I am not doing Murthy Bashing. I respect Murthy for the things he did. But I will not do people worship like my father did. I have nothing against Murthy. But I stand for truth.
More dangerous trend these days is argument that employees pay income tax. It strengthens the disdain Indian honchos have for their employee. Are they slave drivers to claim credit for what their honest employees doing. This disdain then starts them to believe them that employees have no life of their own and are owned by companies. Such a muddle headed reasoning resulted in Tatas ( of all.. !!) to claim IT returns filed by employees as its own..and this is like digging your own grave.. Tatas later may have realized how they erred.. and tried to get arbitration kicked in in India sighting that worker who complained about IT return being pilfered by Tata was indentured do them in India!!!..
Indenture in 21st century..!!! Court threw out that argument and now it will go on trial in the land of freedom. read more at http://www.lieffcabraser.com/press_releases/20070314-lawsuit-against-tata-press.htm
So watch out more on that.
To recap, I have nothing against Murthy. But blogs like this should attempt at correcting our head honchos hubris .. For in hubris you make error. And that may be more damaging to INFY, INDIA and IT.. as tata may be realizing now.
If NRN had not made “INFY pays income tax” music .. I would not started of orchestra..Blame NRN and not me!
spell correction…in the earlier post
Tatas later may have realized how they erred.. and tried to get arbitration kicked in in India sighting that worker who complained about IT return being pilfered by Tata was indentured to them in India!!!..
Tatas have been very devious but they will get their comeuppance very soon. Suddenly the cheerleaders of Murthy Angadi have fallen silent! What gives?
DB,
I don’t have facts to either support or refute NRN. For all I know Narayana may be spot on. However, I don’t get the obsession with bashing IT and NRN on this blog. The post might not have done it, but the responses have/will.
On the specific subject, I would like to know whether any of the non-IT companies pay more total taxes (corporate+total of all employees) than the IT ones. Maybe that is a better way to compare who is being a good corporate citizen. Again, I am not suggesting that IT companies are, but that it would be a better way to compare things.
However, for all its alleged sins, I think it is a foolish argument that IT has done nothing good for our society.
Correction……support or refute Narayana.
Gokulam 3rd Stage,
I am not doing NRN bashing. I am batting for the truth. It is just happens that NRN is on the opposite side.
I hold NRN with high esteem for what he has done. But I will not do people worship like my father did. I will not be afraid to stand up for truth.
I would have been happy counting my greenbacks. But NRNs statement that INFY pays tax invited me to analyze the public data and provide the analysis for public to infer if NRN lied or not.
Regarding your other observation on who paid more tax (IT or Non IT ) if you consider corporate as well as employee IT:
This is a dangerous trend. Company head honchos claiming credit for tax paid by employees is a trap.It is no argument at all. They argument would work if employees were bonded labors of the master. I was appalled at some of the Indian head honchos when they posited that argument. Now employees making the same argument makes me wonder if IT employees too are suffering from Stockholm Syndrome.
I have explained the consequence of above thinking on my blog http://nadunudi.wordpress.com/2007/05/22/clarification/
No NRN bashing.. just the truth.
Narayana,
I admire your search for truth, and also that you don’t worship people like your father did. I am also very flattered that my comment triggered a response on your blog. But I think your claim that you are not bashing NRN is a bit bogus. Words like “cunning and crafty” don’t really gel well with truth seeking. The tone of your post gives you away unfortunately, whereas true truth seeking would probably involve only facts and not adjectives.
You are right that company CEOs should not take credit for whatever taxes their employees pay. Tata did something blatantly wrong. That is however in the domain of tax fraud. What I said about calculating total taxes is to see the overall tax contribution from the activities of the company. I hope you agree that these are different issues. If you wanted to compare how much income tax revenue MICO generates versus BHEL, you would do the same thing. And any CEO/CMD faced by allegations that his/her company does not contribute to taxes will have to take the same route.
And Stockholm syndrome. Do these employees who might agree with their CEOs get that label from you because they agree with their managers or because they don’t agree with you? I am sure some thinking on that question would have you be careful about throwing around such terms. I have many friends who work in IT and most of them are happy and some are even proud of what they do. All of them are smart enough not to become “bonded labourers” of any company or person. You suggesting that they are in some sort of delusion speaks to your opinion of yourself, and/or your opinion of them, neither of which puts you in any favourable light.
BTW, I am neither an IT worker, nor a manager, and am not in any way related to that industry directly.
I agree I am yet to achieve nirvana. So sometimes I get emotional.. But trying to learn from every fall .. Thanks for pointing out the adjectives .. I am truly sorry. I will not use adjectives henceforth..
I am never against IT employees..IT employees have rescued India from bankruptcy. Higher tax collections that are recently reported are perhaps due to higher salaries at entry levels after the 1991 default and decontrol of economy.
But I do think that what TATA did and what NRN implied are same. What TATA did basically has root in the thinking what NRN implied when he made that statement. Implying that what employees are paid somehow belonged to company. That is where you need to put checks and balances on CEOs when they start bragging about taxes paid by their employees, because as I already explained that is flawed argument ( you too agree) and will result in CEOs getting sucked into vicious belief that anything that belonged to employee is company’s and if employee happily endorses that view you can use the term Stockholm Syndrome to describe the condition. My description does not deny worker to take pride in his work or company. That was my view and I thank for having a divergent view.
Taking pride in your work entirely different thing. Let the tribe of IT professionals multiply and prosper. But IT workers must remember it is not the benevolence of the butcher that got bacon on the table.. It is the market forces that made your employer hire you. Otherwise may be we would have been going in the morning to the fields on buffalos and Sahukarru would have been working as Bank Sahebru in some village. Labor Arbitrage rescued both of us and provided both of us better and meaningful lives. So why should Sahukarru not pay tax and claim credit on what you paid. That is the question
GK3S and Narayana
Great posts from both of you! Narayana your reply is simply stunning. You made my day! You have correctly explained why we should be on guard at all times when the more specious among us are posing themselves as saints.
Narayana,
If the butcher didn’t open his shop and knew how to prepare the bacon, there wouldn’t be any for anyone to eat.
Your argument on labour arbitrage is very simplistic. It provided the same opportunity to NRN as to the next Sidda. NRN had the ability to take advantage of it while many didn’t. Implying that there is no effort or sacrifice in building a company, that it all happened because of cost differences is a slap in the face of every entrepreneur that we know of. If it weren’t so special, there would be a million Tatas and Birlas.
And the view that those entrepreneurs that succeed do so by sucking the blood of others is the height of cynicism.
So there we have a Reliance that succeeded because of the government and the bureaucracy, and people say it had ministers in its pockets. And here’s an Infosys that says it succeeded in spite of the government, and we have people crying hoarse that the IT industry is ungrateful.
If that’s not cynicism, I don’t know what is.
Thanks for your divergent views. I appreciate them.
GK3S
So NRN is doing good by stealth:) It is just that the man is one-dimensional. That’s all. We can agree to disagree?
G3S…
excellent take.
a few months ago IE carried a letter to the editor from a businessman who wrote in response to reams of evil lala/shetty platitude. will try to dig that up and post here.
Hope this offers some solace:
http://www.businessworldindia.com/feb2607/indepth06_b.asp
http://www.businessworldindia.com/feb2607/turtles.pdf
Corporate tax as Milton Friedman thought is regressive and retrograde.
ayy yayyo. yen anaachaara. yaar yaar hesaru togotheeri aruna?
capitalist apologist ee friedman. marchi 14 raayara samaaradhne ide, hogi pravachana keLi.
DB,
NRN might not be doing good all the time. But I don’t think he deserves the brickbats that he gets especially from people who have little to show for themselves. And yes, he does seem to be one dimensional. Santoshana devru? :)
TS, I will look for that letter too. Thanks for the heads up.
Aruna, we need some Marx here as Friedman is the devil incarnate. Didn’t you know that?
Whatever the posting it all ends up in NRN bashing. It must be remembered that nothing in life is an unmixed blessing, so is the case of Infy
G3S… guess whose samaraadhane is on March 14? ;)
TS, gottilla guru…in a previous post you said rayara samaradhane…..
Aruna,
I believe you are quoting out of context.
Friedman was pointing out at the regressive nature of corporate tax when it came to funding social causes and was thinking aloud if corporate tax can be replaced by individual taxation. He wanted improvement in corporate tax policies when corporations wanted to donate to charity. Can you please clarify where you got this impression that corporate tax is bad.
Corporations have separate legal entity status and by that nature they need to pay taxes. They are like citizens. They have their rights and hence responsibilities.
Mar 14th is the Karl Marx Samaradhane. I think Tarle Subba needs a shoulder to cry.. :-). All those who miss heavy dose of Marxism we got from Mir, Raduga and Navakarnataka publishers in 80s may raise a toast to the great soul at NASA ( I hope that pub still exists in Bengaloooru ) in their shining new Armani suits and Gucci shoes and with their call center acquired Texan Twang.
Here is template for toast.
Thank you Karl Marx for holding my country’s development for two generations so that now we can enjoy labor arbitrage vis-a-vis other countries. May your soul rest in peace forever.( intent..may you never be born again .:-))
Das Kapital I’ve heard is a weighty book :)
Gotcha Gokulam,
Need a place to keep the book.
I vote for this location.
http://bbs.keyhole.com/ubb/download.php?Number=46979
Gotcha,
Need a location to place the book. I know a place somewhere in London.:-)
I don’t begrudge NRN any of his success. Building a company like Infosys is no mean achievement.
However –
a. I think it is high time that IT companies that have been profitable for more than 10 years (means they are not start-ups) start paying taxes.
b. Stop demanding a disproportionate claim to government funds. Instead of keeping on expanding the EC campus can’t they start one more in north Bangalore and one in West Bangalore. In today’s day and age this should not make them less effective. Make 20% of the office work from home everyday. After all code can be written from anywhere.
c. Give back something to society. I have heard this ridiculous claim (maybe untrue) that Infy has trained the surrounding village people into being excellent sweepers and cleaners for it’s campus. Is that all one can do? Can they run or fund a few schools for the underprivileged?
d. NRN ought to stop pontificating. Just because he is successful in building a company does not make him right on everything.
Sacked NRI IT analyst vows to fight on in US
http://www.rediff.com/money/2007/may/24nri.htm