"Oh! Phew! The tax system in our country is too complicated and encourages black money. It sucks the blood out of our earnings. American Tax structure is more transparent", said Chembulingam, who recently returned from the US.

"Yah! US companies are more systematic and transparent. They love and respect the rules and laws. They never avoid tax. That’s why the country is going ahead, where as, we are limping. All our corporates try to evade tax and finally the burden falls on the Salaried People" --- joined Venkatachalam who stayed in US for two years and is a strong supporter of US laws and their corporate transparency. Both of them were so fascinated about that country and always link US to any topic we discuss. They feel that people living in other countries are dishonest and lack social responsibility.

We all are retired, meet in the morning walk and discuss about the country, politics, economics, share market..., everything under the sky. 

"Trash Boss!", screamed Yogesh Gupta a strong patriot of our country. He said "many of the biggest corporations in the US pay few or no taxes on their profits, according to a recent study." He showed a report to substantiate his point, which reads as under:

The study by the Institute on Taxation and Economic Policy (ITEP) on the 250 biggest corporations in the US found that these corporations paid an average of 20.1 percent taxes on their profits from 1996-98 -- nearly half of the rate of 35 percent required by federal law.

Had all of the companies paid the rate required by law, they would have collectively owed $257 billion. Instead, assorted tax breaks lowered that figure to $159 billion. In fact, some of these corporations even got refund checks from the US Treasury.

Forty-one companies paid less than nothing in federal income taxes in at least one year from 1996 to 1998, according to the report. In those years, the companies reported a total of $25.8 billion in pre-tax US profits. But rather than paying the appropriate $9 billion in federal income taxes, these companies enjoyed tax refunds of $3.2 billion.

Almost half of the tax-breaks went to just 25 companies, each getting more than a billion-dollar tax benefit.

The big winner was General Electric, with $6.9 billion in tax breaks over the three years that the study had looked at. Cisco Systems, the second most valuable company in the US, paid no federal income taxes in the latest fiscal year, despite their $2.7 billion in net earnings.

In another example, Texaco reported $3.4 billion in profits and received $304 million in tax rebates. In fact, oil companies, as a group, were the lowest-taxed industry with an effective federal tax rate of 12.3 percent. Only one industry, i.e., Publishing industry, paid an effective tax level of 30 percent.

How do these companies get away with it? They use a variety of means to lower their federal income taxes, including depreciation write-offs, tax credits for things like research and oil drilling, and tax breaks for doing business in Puerto Rico. For example, GE continues to slash its tax bills every year through its leasing activities that essentially buy tax breaks from companies that have more than they can use.

The fastest growing tax break for US companies is the use of stock options. The study found that, by taking the difference between what an employee pays for a stock and what it is worth, 233 of 250 companies lowered their taxes from stock options by a total of $25.8 billion over the last three years.

Whether in India or in US, companies try to save on the tax. It is the attitude of the people that matters much than the tax laws. As long as there are people like constable Bhagwan Jaggu Gaikwad, who had sent Rs.4332 to Yashwant Sinha as his individual contribution to clear off the external debt that every citizen has on his head, in our country we need not take other countries as examples. In every system good and bad exists. Its high time we delink ourselves from the US comparison in whatever we do. Let us have self respect and say MERA BHARAT MAHAN-- I finally concluded the discussion and we departed.

C Sekhar

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