We need not tell you about the hiked cost of petrol; that is everywhere, but we should have been able to tell you that the customs duty on petrol and diesel has been reduced from 10% to 7.5%. It has been indeed, but where is the customs notification? We tried our best to get the notification, but we found that the only person in the whole country who had some authentic information about the cut in customs duty was Petroleum Secretary M.S. Srinivasan, who announced that the slashed rates are applicable from the midnight of 5^th June 2006. Frantic calls from Oil Companies could not be answered as Revenue Ministry had closed shop by the time the Petroleum Ministry announced the customs duty cut! Tomorrow the notification will be issued and oil companies will seek refund which will be refused and the matter will ultimately reach the Supreme Court of India.

New Form – not all that Saral

“Nothing can be simpler”, declared the mandarins of Ayakar Bhavan about the new Income Tax form for individuals. But tax professionals are not impressed. They feel it is not simpler than Saral. Some opinions:-

++ The new form, called '2F' is definitely not simpler than Saral as the tax assessee is to give each and every detail of expenses incurred by him.

++ The new tax form has Schedule 5, where assesses are supposed to file their cash flow statement-- opening cash and bank balance, various receipts and outgoings during the assessment year.

++ The schedule is optional for this assessment year, but would be made mandatory from the next year.

++ Schedule 5 will require assessee to file their statement of affairs (which is akin to balance sheet of corporates), It will make returns filing a cumbersome exercise

++ the new form would frighten the assessees

++ The new form is definitely not simpler than Saral

++ One fails to understand how this form is going to be easy to fill up, easy to understand with little or no help (from tax experts) as is being said by tax authorities.

++ Filing of cash flow in schedule 5 of the new form is, however, optional in the current assessment year, making life easier for tax assessees at present.

++ Tax assessees need not worry also because they can file returns in Saral form or 2E, up to July 31.

++ the new form is not meant for persons having business income, short-term capital gains from securities, and agriculture income

++ cash-flow statement would reduce the chances of search and seizures and intrusive investigations.

Pakistan Budget Highlights

Omar Ayub Khan presented the budget to the lower house of Parliament, proposing a record 1.3 trillion rupees (US.7 billion; euro16.9 billion) in government spending. He promised better social services, water and sanitation and infrastructure development. The Pakistani Financial Year starts on 1^st July.

++ 415 billion rupees would be allotted to public sector development -- a 52 percent increase from the 272 billion rupees allocated in the budget for the current fiscal year ending June 30.

++ 50 billion rupees (US0 million; euro645 million) for reconstruction of areas devastated by October's 7.6-magnitude quake that killed about 80,000 people.

++ The government aims to bring inflation down to 6.5 percent in the new fiscal year.

++ Government will provide subsidies totaling about 20 billion rupees for fertilizers, sugar, cement and wheat.

++ Pakistan's economy would grow by 6.6 percent this fiscal year, down from 8.6 percent last fiscal year, which was the fastest pace of growth in two decades.

++ Despite easing tensions with archrival India, defence spending was budgeted to rise to 250 billion rupees up from 223 billion rupees specified in last year's budget, although that figure was later revised to 240 billion rupees because of overspending.

++ fiscal deficit of 4.2 percent of GDP, and a proposed 2 percent tax on real estate purchases to help offset the increase in budget expenditures

++ Strong economic growth in recent years has lifted tax revenues to record levels, but only about 1.3 million people in Pakistanpay income tax.

++ Rs 290 million have been allocated for President allowance and staff while Rs 539 million fixed for Prime Minister Secretariat in next fiscal budget 2006-07.

++ Rs 43.907 billion allocated for pension expenses, Rs 5.03 billion for Foreign Affairs, Rs 1.35 million for Information and Broadcasting, Rs 2.191 billion for federal capital, Rs 1.006 billion for National Assembly Secretariat, Rs 564 million for Senate Secretariat, Rs 31.177 billion for Pakistan Railways, Rs 355.534 billion for Privatization and Investment and Rs 50 billion to be spent for the uplift expenses of Prime Minister Secretariat.

"We will make sure that Pakistan's armed forces are armed with the most modern weapons and their needs will be fulfilled...Pakistanis a nuclear power. We will protect our nuclear assets at every cost and we will provide whatever resources it will need," said Khan.

Yashwant Sinha to be key speaker in course forPakistanParliamentarians tomorrow

Yashwant Sinha, former Minister of Finance and Minister of External Affairs, will be the key speaker at the Parliamentary Development Course for Pakistani parliamentarians and parliamentary staff on June 7 at Islamabad. The course on the Budget Process, organized by Pakistan Institute of Legislative Development And Transparency - PILDAT, will feature a comparison of the parliamentary budget processes in Pakistan, Indiaand some other countries likeCanada. It will be the second part of the course on Budget process in which Budget Analysis techniques for parliamentarians will also be discussed.

Tax avoidance to be avoided – whether definable or not.

HM Revenue & Customs director general Dave Hartnett announced that the department wanted to make avoidance ‘not worthwhile’. The latest plan is some combination of the carrot and the stick. ‘We want to leverage the benefits to advisers of reducing risk for their clients,’ he said, implying that the department would reward advisers who steer clear of avoidance.

But Bill Dodwell of Deloitte, the famous tax consultant feels that “Advisers who do things that are legal can hardly be punished or attract negative consequences, however much HMRC dislikes it”. ‘I would love to hear how that is possible under the law,’ he said. Richard Murphy, the anti-avoidance campaigner, has speculated that that might mean advisers involved in avoidance would see their clients investigated more regularly.

Are the Football stars avoiding tax?

Football fever is here from Kolkotta to Kentbut a row is brewing in Englandabout the patriotism of the English Soccer players – or the lack of it in paying taxes. David Beckham and many of his team-mates are able to use fancy financial footwork to minimise the amount they pay HM Revenue & Customs from the lucrative fees they earn by appearing in advertisements for Nike, Pepsi, Gillette and other big names. There is no suggestion that the players are acting improperly, and there is nothing illegal about tax avoidance schemes. But they are politically controversial, and fly in the face of Chancellor Gordon Brown's much-trumpeted campaign to crack down on avoidance. Tax experts have also confirmed that some of England's young millionaires may even be able to claim their haircuts, diamond earrings and sports cars as tax-free 'business expenses. Norman Lamb, the Liberal Democrat MP, said: 'I'm a massive football fan and I hope that Englanddo well in Germany. But in return I'd like to see the players act patriotically when it comes to resisting the temptation to manipulate tax loopholes. After all, everyEnglandfan has to pay his fair share of tax”. Each player in England's 23-man squad is thought to be eligible for up to £300,000 in wages and bonuses for playing in this summer's World Cup. The Football Association would not confirm this figure, but in any case it is dwarfed by the enormous salaries players receive from their clubs. Stars such as Beckham, John Terry and Rio Ferdinand receive in excess of £100,000 a week from Real Madrid, Chelsea and Manchester United respectively. These earnings are subject to income tax. It is in relation to a further income stream, however - earned from endorsing products such as football boots, video games and soft drinks - that footballers can use legal ruses to reduce their tax bill. Fees for commercial endorsements are paid to a player's private firm and treated as company profits, which are subject to corporation tax, ranging from 19 to 30 per cent. This is in contrast to the 40 per cent income tax rate players have to pay for kicking a ball around on the pitch and means that high-earners can avoid paying tax of several hundred thousand pounds a year. Because the commercial fees are for the use of a footballer's 'image rights', anything that contributes to that image - be it haircuts, body piercings, smart clothes, even sports cars - could also potentially be classed as a business expense and deducted from the company's tax bill. Mike Warburton of Grant Thornton, which advises a number of Manchester United players, says that the most tax-efficient way for a footballer to get money out of these companies is to let it accumulate there until he retires: 'Then all he has to do is live abroad for three years and he can take it all out in a dividend.'  Will the tax man get a slice of all this booty?

And you thought the Indian Tax system was so cumbersome!

Until Tomorrow with more DDT

Have a nice Day.

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