Preamble of CBDT's circular, issued in August 2005, justifies introduction of FBT by pointing out practical problems, which were otherwise faced in taxing such perquisites, owing to the following reasons:

• Collective enjoyment of certain benefits where the same could not be individually attributed.

• Benefits disguised as reimbursement, or other miscellaneous expense which could enable employees to escape, or reduce their tax liabilities.

• Difficulties faced in evaluating benefits.

WHAT IS WRONG?

    The main point of contention is that certain genuine business expenses, where there is no collective, or individual benefit to employees, are subject to FBT. Illustrations include: sales promotion and publicity expenses and expenses on conference & customer seminars. Further, as mentioned above, FBT is not tax deductible for the employer.

    It is viewed that the Indian FBT provisions are largely modelled on the Australian FBT regime. However, a moot point is that in Australia genuine business expenses incurred solely in performance of employment-related duties largely carry a `nil' fringe benefit value.

    It would be better if the tax is recast in the following manner:

• Ensure that only collective benefits provided to employees are classified as fringe benefits (such as Hungary).

• Ensure that genuine biz expenditure is not regarded as a fringe benefit.

• Fix monetary limits (or provide for a de minimus, or threshold value) for each head of fringe benefit. Any payment above a particular value against this head to employees should be treated as a fringe benefit . In New Zealand any subsidised transport to an employee with a taxable value of $1,000 (2007 limits), or more, is subject to FBT.

GLOBAL COMPARISONS

    Tax on certain fringe benefits paid to employees is levied in the hands of the employer not only in India but also in Australia, New Zealand, Estonia and Hungary. In general, most countries levy tax against such benefits in the hands of the employees.