They say "Pay your taxes, hold your head high". Well, not so fast. If you are a part of the Indian IT Industry then I would ask you to wait. That's because come the month of January, employees all over India will become busy in submitting bills and receipts to claim tax exemption Nothing wrong with that. It's a provision given by the Government. But the key point here is that for expenses like petrol and telephone, it's mandatory that it should be an expense done for business purpose and not personal.
Every year there is an obscenely large amount of bills that are submitted and accepted but have nothing to do with business. The bills per se are not fraudulent but the expense is clearly a personal one. Medical bills and rent receipts are a different story. Many of them are clearly fraudulent. Medical bills are procured from corrupt (this word has lost its meaning) shop owners and rent receipts are printed, forged and submitted by people who are living in their own or parent's house for donkey's years. This goes on year after year with no obstruction whatsoever from employers and no one thinks twice about it. If you are one of the few people who do not submit fake bills and fraudulent expenses, give yourself a pat on the back. But look around and you'll see that you're in a terrible minority.
I've had heated discussions with friends, colleagues and even employers on this point. I have tried in vain to convince my colleagues that this is illegal not just unethical. I've tried to make employers put in some stringent policies for avoiding this but to no avail. Over the course of these discussions I've heard many excuses:-
1) Everyone does it - Well, this excuse has been heard many times but in whichever context you use it, it is definitely not applicable. The fact that everyone is doing it does not give you the right. It still makes your actions illegal. The only consolation is that you're not alone.
2) What is the government doing for me? - I don't want to sound cliched but John F. Kennedy's statement "Ask not what your country can do for you, ask what you can do for your country" stands true here. You may not like a particular government and think that it is corrupt. But that in no way gives you the right to not pay taxes. If you think that your taxes are always going to end up in some corrupt politician's pocket, you are wrong. Your money might also be helping fund the Pulse Polio campaign which has made India polio free. The fact is you cannot rationalize using this excuse and the real truth is that you just want to save money.
3) I need to save money - Tough luck. If it is correct to use illegal means to save money and essentially make money, then we need to release a lot of prisoners in our jails as many of them indulged in theft as a way to get out of poverty. Saving money is good but only if it is done by legal means. Just because you don't get caught doesn't make this legal. It's just like following traffic signals when the traffic policeman is not present. You know you won't get caught or have to pay a fine, but you still follow the rule (hopefully).
4) Catch the corrupt politicians first - Yes, they need to be caught and taught a lesson. As a country, India needs to improve a lot in terms of corruption. But it starts with every individual. We have no right to berate the corrupt politicians and talk tough about them if we ourselves are indulging in corruption. Yes, avoiding taxes by fraudulent means is corruption. Just because it's not under the table doesn't make it any less grave. So before you do a fast against corruption to support Anna Hazare or talk about severe punishments for A. Raja and Suresh Kalmadi, think whether you have earned the right to make such statements.
The sad part about all this is that the employees who are indulging in these practices to "save money" are ones getting 6 figure or even 7 figure salaries. You may think that these small amounts will not make a difference but it does. As an example and that too a very conservative one, let's consider that only half of the Indian IT industry (about 15 lakh individuals) end up not paying just Rs. 1,000 in taxes by fraudulent means. Essentially we end up not paying the exchequer Rs. 1,50,00,00,000 in taxes. That's 150 Crores. This is still a very very conservative figure. So think again.
What are the solutions to this? Well, if you're not in a position to formulate policy or make your voice heard to the management then you can definitely make some changes in yourself. Don't give fake receipts and fake reimbursement claims Encourage your colleagues, friends to do the same and be a role model for others. However the onus lies more on the employers and policy makers. Every company should have a strict policy of dealing with fake receipts and claims. If you are a small company it's easier. You know what is a business expense and what is not. You know who lives in his own house and who lives in a rented accommodation For large companies, it's important to do surprise checks and punish offenders. It's only when people know that they will be punished severely for saving couple of thousand rupees that they will think again. If there's no punishment, it's just a bonus.
Whenever we see a traffic cop, we think of him as a corrupt guy taking money without giving a receipt. We take pride in saying that we were caught but we insisted on a receipt from the policeman. Where does this pride go when you submit a fake receipt for rent or petrol? The next time you bad mouth a policeman for being corrupt, compare yourself with him. This guy stands in the sun, in all the pollution, works in terrible shifts and gets a measly salary for his work. You work in a plush A.C. office, get free or subsidized food and a fat pay cheque every month. If you can justify yourself by any excuse for not paying tax, then he is more than justified in taking money without giving a receipt.
The truth is BOTH are wrong. There is no justification or excuse for indulging in illegal and unethical behavior. The sooner we realize that as Indians, we will take a bigger step towards eradicating corruption.
Well written ... Its hard to be idealistic in India and also to make sure that others follow the ideal path . I agree on the strict measures to be taken. Also i don't think its hard for big companies to know which employee is committing this kind of fraud .Empower the manager to check this status of the employees that directly report to him. He knows most of their details and could identify frauds .. All this will happen only if the manager's hands are clean .
ReplyDelete@Tejas - Yes, it's extremely hard being idealistic in India :) .. I agree about your process of putting the onus on the manager. In addition the HR / payroll can perform random checks too. I think it's all about setting the culture and being clear on what is tolerable and what is not. Once you set the culture and actually show that action will be taken if something like this is done, then there will be a reduction.
ReplyDeleteNice post. Hope some people get converted after reading it. On the bright side, most of the companies I have worked for are not just scrupulous but also vigilant. Sure, some fake bills do slip through, but when someone is caught, they are terminated, regardless of the amount involved.
ReplyDeletePrasanna:
ReplyDeleteI completely support what u have said. But the real battle is to change the mind set of the ppl.
having and enforcing strong laws is a need but changing this criminal mindset should be our priority and the reason why we have reached such a low pt is due to loss of values. So my friend we all should think and find solution for this graver problem
Good values and respect for law is a reflection of the parents and family of the individual. A few facts more - As per law, every company which has a liability of deducting taxes from employees from payments made to them has to appoint a tax compliance officer, who also prepares and signs the Form-16. This tax compliance officer is internal to the company and could be an employee himself or an outsourced agent. These individuals are aware of the law and try to use the loopholes to incorrectly avoid tax and cheat the tax laws. Especially if such compliance is outsourced, then the loyalty factor and concern for the company and employees as colleagues is missing. These agents also know, such cases will get detected eventually and they will have the further opportunity to represent the company and fight a legal battle with tax department (and obviously get paid for that) and eat into the company's profits tomorrow by way of consultancy and lawyers fees. Most employers new to the subject get trapped in the sweet talk of these outsourced agents on how to avoid taxes both legally and otherwise today and jeopardize the future of the company. Later these same employers complaint that tax and other litigation costs have risen and employees bonuses have to be cut down or not paid for. A company which does not respect the law of the land is designed to only achieve short term goals with short sighted objectives. Future is always bleak for such employers who believe and practice corruption as advised by their willy and shrewd consultants without understanding the implications of the law by themselves. Be alert and watch and take appropriate corrective / evasive action for self preservation would be my advice.
ReplyDeleteI agree that providing fake bills is not correct and should not be appreciated. But saving income tax is not a crime. Its my hard earned money and government has made such arrangements where one can save the income tax. Even if I pay rent to my parents then also I do not believe there is any wrong deed in this.
ReplyDeleteWe are already paying our 40+% income in indirect taxes. India has around only 3% tax payers of total population and every year government is increasing the pressure on this 3% population only.
They have to made some modification in tax laws so that maximum population could be cover in tax slabs instead just targeting 3% for their Annual Income and expenses.
@Prasanna - I agree. If we change the mindset it will be a long term fix. But we do need the constant checks to be made to see if the values are being upheld. Unfortunately we cannot just rely on people having good values and we need to punish and explain where things go wrong. A combination of both will work well in the long run.
ReplyDelete@Ashwin - Thank you for the comment and advice. I completely agree with you that the future is bleak for employers who believe and practice corruption.
@Mrinal - Thank you for your comment. My anger is only towards the fake bills and unjustified business expenses. Wherever an expense is a valid business one and the bill is not fake is not a problem at all. If rent is being paid to parents specifically then even that is completely justified in being exempt from tax. The tax slabs and laws do need amends, they're not perfect in any sense. But imperfect tax laws do not give any one the right to evade tax by illegal means.
ReplyDeletehey Vineet!
ReplyDeleteChanced upon you blog and was quite happy to read it. This is the only one I read so far. And Since i recently became taxable and followed conversations around it, mostly share your anger.
I do believe that while the company has to have a strict policy, what you said about the 'corrupt' policeman and holier-than-thou me is what appealed to me most.
@Prasanna-Mindsets can be changed when we start from ourselves... its slow but not v hard...
Keep going mister!