Why Tax equalisation? Today, with economies going global, companies are deputing its skilled and experienced employees (referred to as 'expatriates') all across its global locations to carry out their businesses. In such a situation, the expatriate's salary and effective purchasing power are depleted, in comparison with his former home place. One cause of salary and purchasing power reduction is - no doubt - the taxation effects. An expatriate, being a person of ordinary economic prudence, would not agree to being assigned to a host country, with tax rates higher than in his home country and end up paying higher taxes on his income. At the same time, an expatriate would prefer being assigned to a host country with a lower tax regime to benefit by saving taxes on his income. Such disparity in tax rates between the home and host country gives rise to the concept of TEQ. The principle behind a "TEQ" policy is that the expatriates will not need to suffer, neither a financial hardship nor experimenting a financial windfall, all being the result of the tax consequences of an international assignment. It means an expatriate pays no more and no less tax as a result of his assignment than he would have paid had he never left his former home. The company would be paying all related worldwide effective taxes for the expatriate. How does TEQ work? TEQ policy is designed to make tax a neutral factor in an expatriate's compensation package. That is, the assignee should bear a tax burden equal to that which would have been borne had the expatriate remained at home. The expatriate is responsible during the assignment for "hypothetical" or "stay-at-home" tax, which would be calculated on the remuneration the expatriate would have earned if the assignee continued to live and work in the home location (i.e. it excludes all assignment-related compensation). Hypothetical tax will normally be withheld from the expatriate's normal pay and is retained by the employer as a "tax reserve". The company would then pay all required home and host country taxes on assignment income (including taxes on expatriate benefits) during the assignment. For a number of companies, the expatriate would not be tax equalised on income from non-company sources, for example net investment income from home and host countries, which means that the expatriate will remain fully liable for all actual worldwide taxes payable on the personal income. TEQ- the process: The tax payable by an expatriate in the host country is calculated based on the tax system of the host country after claiming all the relevant exemptions and deductions given by the applicable tax laws of the host country. On the other hand, the taxes payable in the home country would be computed using the relevant tax laws of the home country. Tax calculations of both the counties would be compared and then if the host country taxes are more than home country taxes, the difference would be borne by the employer company. And if the taxes of the host country are less than those of the home country, the difference would be recovered from the salaries of the employees. Under an equalisation policy, any tax savings will go to the employer but, similarly, any additional tax liability will be borne by the employer. Benefits of the TEQ policy: Such policy will put the assignee in a tax neutral position during the assignment. Mobility is promoted because several assignment locations are producing no tax benefits or detriment to the assignee. The company will be paying all worldwide actual taxes and the employee only paying his usual home country.
Tata Motors (TATAMOTORS.BO : 160.9 -10.7 While Ratan Tata's People's Car is breaking new ground in the brick and mortar world, it could also be navigating new frontiers in the virtual world. The company too is pushing Nano on the Web. There is an Orkut community and a Facebook profile, a Tata Nano Forum and company administered blogs. Senior Tata Motor officials have been interacting with potential buyers and Nano fans in their attempt to catch the pulse of customers and car lovers. Social networking is a new tool that Tata Motors has put to use for selling Nano. The Nano campaign, few hours before its release, has been intensified through its extension to networking sites such as Facebook and Orkut, making the 'world's cheapest car' known to a larger mass. The official Tata Nano Orkut Community has 51,300 members and Orkut on its own has 378 communities. On Facebook there are 44 groups that keep discussing Nano. The official Tata Nano Facebook profile says 'good, bad and ugly, all comments are welcome'. The Tata Motors Forum has 22,763 users who have till now covered 31 subjects related to Nano. Interestingly, several Nano fans have responded from across the globe and were keen to see the car in their country from Australia to Serbia but the company has responded saying there were no immediate plans for exports. On its own website, Tata's marketers also discuss sales strategies. There have been several queries for online buying and the company has responded stating that this would be difficult at this stage. Buyers have expressed their desire to buy the car on-line and are even willing to transfer funds pronto. Instead, the company has offered options ranging from contests to building your own Nano on the Web.
) small car is making a big web in the online space. For, 19,50,000 entries is what you get if you do a Google search for Nano. And it throws up 18,10,000 image entries in just 0.08 seconds. In the blogosphere too, there is frenzied activity. In the past week alone, there have been 1,414 blog postings that have sprung up and 1,37,759 new blogs have been created on Nano.
American International Group Inc., the insurer under fire for handing out bonuses after its $173 billion government bailout, budgeted $57 million in “retention” pay for employees who will be dismissed. AIG disclosed the payments, part of a larger $1 billion program meant to retain staff, in a March 2 filing. The insurer was chastised yesterday by PresidentBarack Obama for awarding $165 million to staff of the derivatives unit blamed for the firm’s near collapse, and New York Attorney General Andrew Cuomo said he’ll subpoena AIG to get details on those payments. “Spending a billion dollars on retention payments while the company is on its deathbed is ludicrous, particularly when some of those payments are going to employees the company plans to terminate,” said Representative Elijah Cummings, a Maryland Democrat on the House Oversight and Government Reform Committee. The disclosure on expenses for “employees expected to be terminated” may signal AIG is planning staff cuts after leaving total employment unchanged at 116,000 last year, according to regulatory filings. The U.S. saved the firm from bankruptcy in September, and the company posted the biggest quarterly loss in U.S. history in the three months ended Dec. 31. “As part of restructuring the company, we will ultimately eliminate jobs that are, at the moment, critical to maintaining ongoing operations and winding down certain businesses,” said Christina Pretto, an AIG spokeswoman. “To have one of these positions obviously implies an uncertain future, and creates an incentive to leave the company. To retain such mission-critical people, we are making retention payments to them.” The March 2 filing didn’t say how many employees will get portions of the $57 million. Auto Unit, Lender The world’s biggest financial companies have cut more than 280,000 jobs since the middle of 2007, according to data compiled by Bloomberg. The total includes about 1,000 cuts at AIG, which trimmed staff at its U.S. auto unit and consumer lender. The regulatory filing that lists 116,000 jobs companywide doesn’t specify which units added or cut staff, and Pretto declined to comment on the total number of workers. AIG, which got an initial two-year loan for $85 billion in September, created retention programs designed to keep some staff in place through the end of 2009, according to regulatory filings. Under a revised package valued at $173 billion announced this month, the insurer has five years to repay loans by divesting businesses, raising the possibility AIG will have to make more of the payments. ‘Double Down’ “To retain the same individuals for a period further in time, we might be paying out sums of money that are ‘double down’ on a bet that the company will be turned around,” said Frank Glassner, managing partner of Veritas Executive Compensation Consultants LLC. The company planned to award about 4,600 of its managers and employees a total of about $1 billion, Bloomberg News reported in January, citing two people familiar with the situation. In addition to $450 million for employees in the financial products unit that sold credit-default swaps, AIG was to give about $470 million to staff of three other subsidiaries and $148 million to top executives, according to the people and company filings. Of the $450 million for the financial products unit, the $165 million in retention pay was for 2008 and due to be paid by March 15, $55 million was paid in December and an additional $230 million was originally earmarked for 2009 retention payments. Chief Executive Officer Edward Liddy has said he wants to reduce the 2009 payments by at least 30 percent. AIG gave bonuses of $1 million or more to 73 people at the unit, including a top recipient who got $6.4 million, Cuomo said today in a letter to Representative Barney Frank, chairman of the House Financial Services Committee. Frank said today he is “troubled” that AIG wants to pay extra to keep employees at the unit. “That leads me to question the judgment,” he said in Washington.
U.S. stocks advanced, recouping yesterday’s losses, on an unexpected rebound in homebuilding and speculation that the Federal Reserve will outline more plans to bolster the economy tomorrow. Centex Corp. helped lead a rally in construction companies and Home Depot Inc. jumped 6 percent as housing starts unexpectedly climbed 22 percent in February, the biggest jump since 1990. Citigroup Inc. and JPMorgan Chase & Co. rose more than 3 percent. Producers of raw materials posted the only decline among 10 Standard & Poor’s 500 Index industries after Alcoa Inc. cut its dividend and Nucor Corp., the nation’s biggest steelmaker by market value, said it will report a first- quarter loss because of dwindling demand. The S&P 500 rose 1.5 percent to 765.36 at 2:24 p.m. in New York. The Dow Jones Industrial Average increased 77.66 points, or 1.1 percent, to 7,294.63. The Russell 2000 Index added 2 percent. “The markets are in a show-me phase,” said Tom Wirth, senior investment officer at Chemung Canal Trust Co., which manages $1.5 billion in Elmira, New York. “Housing is showing signs of stabilization, which should help firm up the equity markets.” The S&P 500 yesterday halted a four-day rally that had propelled the index up almost 12-perent from its 12-year low on March 9. The gains were triggered by optimism that the worst of the financial crisis was over after Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. said they were profitable in the first two months of the year. 15 Percent Slump The S&P 500 has declined 15 percent in 2009, rising in only two of 10 weeks this year, as mounting losses at banks raised concern the government would be forced to nationalize some lenders. The index lost 38 percent in 2008, its worst year since the Great Depression. Yesterday’s declines came as a rally in financial companies was snuffed out by concern over rising credit-card defaults, while SanDisk Corp. led a slump in technology shares. Today’s advance came amid speculation that Fed policy makers will consider increasing the pace and size of a $600 billion program to purchase mortgage securities and other assets. That would signal a more aggressive stance from Fed Chairman Ben Bernanke after the economy and job market deteriorated further since the Federal Open Market Committee last met, analysts and investors say. The FOMC meets today and tomorrow and is expected to release a statement tomorrow afternoon. ‘Optimism Building’ “Bernanke has been cheerleading the economy so there could be some optimism building around his comments tomorrow,” said Eric Bjorgen, a portfolio manager at Leuthold Group, which oversees $3.2 billion. Centex gained 50 cents, or 7.3 percent, to $7.39 today and an S&P gauge of 13 homebuilders added 4.6 percent. Work began on 583,000 homes at an annual rate in February, topping the 450,000 projected by economists in a Bloomberg survey, the Commerce Department said. The jump was influenced by warmer weather and an 82 percent surge in starts on condominiums, apartments and townhouses. Home Depot advanced the most in the Dow average, adding 6 percent to $21.35. The largest home-improvement retailer was raised to “buy” from “hold” at Jefferies & Co., which cited market share gains. Citigroup Inc. had the Dow’s second-biggest gain, climbing 5.2 percent to $2.45, extending its rebound from a March 5 closing low to about 140 percent. The stock is still down 63 percent this year. Material Producers Slump Alcoa and Nucor Corp. helped drive down raw-material producers in the S&P 500. Alcoa slid 50 cents to $5.62. The company said it will slash its dividend to 3 cents a share from 17 cents and cut costs to conserve cash. Nucor fell the most in three months after forecasting a first-quarter loss of as much as 65 cents a share because of lower-than-expected demand. Nucor lost $4.43 to $32.52. Genworth Financial Inc. and Hartford Financial Services Group Inc. advanced after state insurance regulators said a major insurer’s failure will not jeopardize the entire industry. “Even a major insurer failure, while traumatic in terms of job displacement and, perhaps, for shareholders, will generally not impose systemic risk,” Michael McRaith, director of insurance for Illinois, said in prepared testimony to the Senate Banking Committee on behalf of the National Association of Insurance Commissioners. Insurers Advance Genworth climbed 12 cents, or 8.3 percent, to $1.56 and Harford advanced 32 cents, or 6.9 percent, to $6.87. Morgan Stanley fell 1 percent to $22.78 as the stock was downgraded to “underperform” by Bank of America Corp. analyst Guy Moszkowski, who cited concern over the bank’s commercial real estate holdings. Financial shares in the S&P 500 added 2.1 percent. The group dropped as much as 2.2 percent in the first half hour after analyst Meredith Whitney told CNBC that banks’ profit forecasts “may come back to haunt them” because they probably don’t include writedowns on bad assets and provisions for loan losses. Banking Outlook Bank of America Chief Executive Officer Kenneth Lewis said on March 13 that his company was profitable in January and February, joining JPMorgan and Citigroup in suggesting the nation’s three biggest banks are recovering from the credit crisis. The announcements last week helped spark a record rally in financial shares. The S&P 500 Financials Index surged 34 percent last week, the steepest advance since S&P created the gauge of banks, insurers and investment companies in 1989. Cisco Systems Inc. gained 1.9 percent to $15.74 today. Goldman Sachs Group Inc. added the world’s largest maker of networking equipment to its “conviction buy” list, citing the introduction of its so-called blade platform.
An information technology sector veteran has strongly defended job cuts, saying it's natural in times of recession to stay the course and remain afloat. "When there is no business, companies have to react; otherwise no body will survive. Either you have to reduce everybody's salary, or you have to let some people go and move on with that", the former IT Secretary of Karnataka, Vivek Kulkarni, said in Bangalore. "Because, if you do not have labour flexibility, you can't do business well", added Kulkarni, who has more than 25 years of experience in business and government, and is currently Chairman and CEO of knowledge process outsourcing firm, Brickwork India. He admitted that IT companies have resorted to various ways to layoff their staff. Some companies are forcing their managers to give a "lower-rate" to their employees so that they can be removed, citing "non-performance". Kulkarni knows a company which lost an account of 6,000 people (staff working on an outsourcing contract). "What will you do (when that happens). So, there will be temporary dislocation; no permanent harm". In times of recession, layoffs are quite natural. He said companies which have lost big accounts and are operating from huge facilities after signing multi-year lease contract, are reducing and rationalising staff. Kulkarni said the year 2009 is going to be challenging for freshers in the IT sector and it would be tough for them to get jobs, but expressed confidence that hiring would restart in the first quarter of financial year 2010-2011. On the impact of US recession on the Indian IT companies, he said while large players such as Citi Bank and Goldman Sachs "who have received government money (bailout package) will behave based on government directions", there are other US companies who would be keen to outsource to India for the first time. "For what I am finding is that for the rest of the companies (US companies who have not received Government aid) to survive, they have to do business (they would benefit if they outsource to India)", he said. According to him, Indian IT companies are increasingly looking at the domestic market. "Because our economy is big. Our companies can, instead of doing it for Citi Bank, they can do it for SBI (SBIN.NS : 950.05 -37 "We are a country...we are big enough. We may not need help from foreign countries (outsourcing) all the time to grow". Kulkarni said: "if we have the right government, if they are able to come up with some policies, we should be okay by Septemeber/October of this year".). So, we can do work for our companies and that's picking up. I see that Indian IT companies now focus on domestic sector a lot".
ndia expects to meet its downwardly revised direct tax collection target of 3.45 trillion rupees ($67 billion) for the 2008/09 fiscal year ending on March 31, a finance ministry official said on Tuesday. "We are confident of meeting the target for 2008/09," the official, who declined to be named, told reporters. In last month's interim budget for 2009/10, the finance ministry had revised down its forecast for direct tax receipts in 2008/09 to 3.45 trillion from 3.65 trillion, reflecting a slowdown in the economy. The official said direct tax receipts between April 1, 2008, and March 16 rose 18 percent from a year ago to 2.96 trillion rupees, including advance taxes paid by the corporates for the fiscal fourth quarter. The government has forecast the fiscal deficit at 6 percent of gross domestic product, much higher than an initial forecast of 2.5 percent, as growth slows to around 7 percent in 2008/09 from 9 percent a year earlier.
India's gold demand was weak on Tuesday as buyers stayed away on hopes of more falls, traders said. "We are not able to sell even one gram of gold. The local demand is very bad and everyone is waiting for lower prices," said Ranjeeth Rathod, a director with Chennai-based wholesaler, MNC Bullion. The benchmark April contract recovered from a low of 15,109 rupees per 10 grams to trade 15,168 rupees, still down 0.15 percent, at 1:50 p.m. Overseas gold dipped 0.4 percent pressured by scrap dealers selling to lock in profits around $920 per ounce, but a rise in Asian equities suggested some recovery in risk appetite. Traders said a fall in prices to a minimum of $875 an ounce would revive demand ahead of the weddings in the first week of April. "All traders have placed advance orders in between $875 and $905 for fresh buying," said Harshad Ajmera, proprietor of JJ Gold House in Kolkata. Local gold was cheaper than bank gold, signifying weak demand and profit-taking by traders. "There is disparity of around 200 rupees between bank and local gold,"
The Indian information technology industry has reacted with a mix of hope and caution after President Barack Obama said last week that he will not allow US companies that send jobs away to enjoy his tax breaks. Obama is presumably talking about industry-specific tax breaks, though the details are not clear yet. But it is clear to me that he cannot go very far. For instance, the US plan can affect General Motors, which is getting government help. I know from experience that GM is doing advanced design for its next generation of automobiles using aviation-standard materials in Bangalore. Does Obama's budget mean that GM will stop using India as a base for innovation? How will GM keep a global edge? Now, take Accenture, which many think is a US company. It is actually incorporated in Bermuda. Will a US-based retail company (like J.C. Penney, for instance), handing over IT work to Accenture suffer from Obama's moves? If it does, and rival IBM gets a deal that Accenture might have had, remember that IBM has tens of thousands of employees in India, doing work for US clients. The simple point is that US has itself led efforts in making the world economy in an inter-connected web. The nitty-gritty of crunching IT spending is going to be painful. US firms have already lost the game of efficiency in automobiles to the Japanese and in overall manufacturing to the Chinese. In pharmaceuticals and services, Indian firms can shake the US in everything but blockbuster product development. If you take new products, IT and distributed global research and development are at the heart of whatever remains of Ameri-can capital efficiency, innovation and competitiveness. In other words, US firms are no longer US firms, but effectively global firms. By doing harm to what Americans call outsourcing, Obama may be axing a branch he is sitting on. Which is why I see his speech as little more than symbolic post-election posturing. If the benefits of tax breaks are outweighed by the gains of outsourcing, US firms will do what makes more sense to them.
