Angadiyalli Atanka

May 15, 2007

Fax Received in PDF format

Murthy Angady received the much feared fax today. The text of the fax can be read from the pdf link provided. It is interesting to see that honorable senators pointing out that number of H1Bs applied from Murthy Angadi to be around 5000. However , the data from the department of labor puts that figure to be in excess of 20000.
Perhaps Murthy Angadi does rotation of H1Bs as alleged by programmers guild. That explains the mismatch in figures. 5000 is the number of new visas for year 2006 and around 15000 is the number of transfers done by Murthy Angadi in year 2006.

Now let me give an analysis.

Is INFY an H1B dependent employer?

INFY will exploit the loophole- The law stipulates that anyone who has more than 15% of its staff on H1B to be H1B dependent employer. The law is not clear if the staff to be considered is global staff of only staff based out of America. Infy will smartly answer this question taking help of liberal number of India based employees in the denominator and show that total number of H1B to staff ratio for Infy is less than 10% .. i.e 5000 H1B for a global staff strength of 50000. What Infy would not mention is almost entire US staff is on H1B and hence technically Infy would have been H1B dependent.

Average Wages Paid

Average wages bordering 55000 USD may look respectable.. But Infy hides the facts. What senator should insist is hourly wages.. INFY gives a 10 day vacation whereas typical American employers give around 20 days in vacation and sick leave. Also there is an unsubstantiated rumor that the salary quoted by INFY includes statutory contributions it makes for PF in India. So technically whatever salary INFY quotes is atleast 10% more than it actully pays.

Other questions are cake walk for INFY.

What senators should have asked..
What is the Income tax paid by INFY in India and in US?
What portion of these taxes are payroll taxes?

Murthy would have sung National Anthem then.

Fax

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Murthy’s National Anthem Issue – Was it overblown

April 15, 2007

Bloggers worldwide are now left to wonder if they made an error while reacting to Murthy’s comments on National Anthem and making him abandon his plan to plant himself in Rashtrapathi Bhavan.

We are posting this thank all the bloggers who provided support for our campaign against Murthy’s Nationala Anthem comments. But some of us are gentle souls and ask if we did right thing on picking up a fight over what could have been a slip of tongue.

Well!!! Murthy’s comment on National Anthem probably was a slip of tongue . But what made it into a a large controversy is snowball effect provided by bloggers. The resentment against Murthy Angadi was about to boil when Murthy put his foot in the mouth.The last incident may well have been a slip of tongue.

But, Murthy’s statement that he paid taxes when in effect he paid zero taxes is not a slip of tongue.
Murthy’s firm’s US arm declaring losses to avoid US taxation is not slip of tongue.
Murthy’s firm’s labor arbitrage kitty of over 700 mil USD is not slip of tongue.
Murthy’s firm paying below market salaries in US is not slip of tongue.

So bloggers. Great job.. Your target deserved every bit of bad publicity it received. Job well done and proceed now to make INFY accountable for other issues.


INFY Tax investigation

April 13, 2007

We have no issues if Murthy says he paid no taxes. But we have issues if he tries to pull wool over intelligent people of Karnataka.

Murthy on a recent clarification said that his company paid taxes and that is the statement we feel is very misleading.

We have started an investigation into tax malpractices of Murthy Angadi

As part of this we came across this interesting dialog between California State Senator Joseph Dunn and INFY head honcho Nandan, that was reported in the media in 2004.

Please find the excerpt below

On Mar. 5, California State Senator Joseph Dunn greeted an application for a tax exemption by Infosys Technologies Ltd., India’s premier software-services company, with an accusation that such companies ‘want to steal jobs’ and ‘taxpayer dollars.”‘ We would like to clarify for your readers:

Infosys pays taxes in all jurisdictions where it operates, based on domestic regulations and also using internationally recognized practices. Infosys has filed income-tax returns and paid income taxes in the state of California as per regulations laid out in the domestic tax regulations. Infosys is not requesting any tax exemption or incentives but has requested an alternative filing methodology that is permitted by the laws and regulations of the state of California. Our position to the specific case of Separate Accounting under California Revenue & Tax Code section 25137 has been mentioned in the filings with the Franchise Tax Board.

We would be grateful if you could publish this clarification, as otherwise it would give an impression that Infosys is unjustly seeking tax relief.

Nandan M. Nilekani

CEO

When California state government rejected the INFYs argument that it can not be taxed in US because it was an Indian entity and pays tax in India (It is another trick. Instead of saying that you did not pay.. You say you pay and then if someone seeks further clarification come up with explanation I pay zero tax– Wow. Indian invented zero and INFY seems to be internalized this )

Later that year INFY CEO admitted to media that they indeed had to pay tax in California but the amount is meager.

“Either way, we will bear minimum impact as the tax amounts to US$1 million against a revenue of US$1 billion and it is not a federal tax, but a state tax,”
Krish Gopalkrisnan, COO and deputy MD of INFOSYS
on record in media in 2004 after California State Tax Fiasco

How come a small sum of 1 mil USD became 70 mil USD? When INFY has accepted in the Annual report this year that 96% of its revenues in India are not taxable because they have a tax holiday till 2009. ( and SEZ scheme will further this period beyond 2015 )

Another interesting observation.

After that INFY actually makes a loss in US. ( See Infosys consulting’s balance sheet ). Now they make losses in US they need not pay even those peanuts.

But when it comes to printing annual report , strangely INFOSYS reports paying international taxes.
If we can get the IRS report on how much tax was paid this year, murthy may be forced to sing National Anthem forever. ( Like Bajaj did a la swadeshi)

Now I have request for the readers of this blog.
Request for those who are in India:
If you feel that I am raising right issue please forward this blog to as many friends as you would want. I want more views from the page to convince my american friends to file an IRS public record access under freedom of information act. I heard that fees can be around 50 USDs which is a small change for my american desis. But all that they ask me is “Ningobannige Yako E Tarle”.

And, Request for those who are in the USA.
After the INFY california tax fiasco , INFY consulting in USA officially finishes it balance sheets in the red.!!! So next time when another INFY marketing manager talks about value being delivered ask them to get some of those values into Infosys Consulting. Tell them you do not trust a loss maker to teach US business how to make more profits!!. Please forward this blog to vendor management team at your organization so that INFY might be asked this question.


Response to Nikhil from Churumuri

April 13, 2007

Nikhil,

If NRN were a votary of “Marketplace Nationalism” he could have made himself unavailable to his own grandiose plans to plant himself in Rashtrapathi Bhavan. The talk started in strait times on April 3rd 2007 that NRN wanted to contest presidential elections. Marketplace Nationalist in NRN could have clarified to the world about his aim being white house instead of rastrapathi bhavan as part of this Marketplace Nationalism.

It is possible for one to have alternate view on nationalism. But NRNs comment on TV showed none of that. NRN never had what Jagadish Bhagwathi is advising . For example, Jagdish Bhagwathi has been a vocal advocate for paying your taxes. In fact he is on record to have asked for dual taxation for dual citizens!!!. (Refer this link)
My grouse is why does not NRN pay taxes? Why is he cheating poor in India of their land, Indian tax machinery its taxes, Educated Indians their due wage. Do not try to put an aura around NRN. He is just a reckless profiteer and his hollowness comes out often with these kind of statements.

Regarding the statements from Patil, I agree Patil is no saint. But in democracy each one needs to be there. When a business man who profited immensely at India’s expense forgets the sacrifice the country men have done for him, he has to be threatened with deportation.

It is another matter , that NRN will fight nail and tooth any deportation. Because he wants to eat free and it is possible only in India. He knows that very well .. that explains why the minority interest on INFY balance sheet is negative. I do not know any other company that has such peculiar accounting.

I have done enough analysis on NRN’s nefarious schemes at

https://muthry4prez.wordpress.com

Do not forget to read the latest blog on tax issues at INFY here .
It will make your blood boil because you know the taxation in US.


INFY TAX: Need help from tax experts!!!!!

April 13, 2007

Muthry’s job is very interesting. Cleaning the dirt all the time. But the dirt Murthy leaves behind is so overhelming that sometimes I feel hopeless.

But I am getting lot of encouragement from readers response and hence decided to dish out next analysis.

This time let us check through following statement made by Murthy recently.

Reproduced in part here.

“IT companies pay Income Tax to the government and their employees spend a major portion of their income in the place they live. We have paid for it. Nobody is doing anybody a favour,”

Please read through analysis and then decide for yourself if Murthy’s statement that he paid taxes makes any sense.

First let us check out who pays what tax. INFY has lot of brand image that it is doing a lot to the society. So I will be happy if INFY does marginally better than any other company. But let me be very kind to INFY so I will lower the bar. INFY would win even if it manages to beat companies who do not have good social image. Arbitrarily I chose some companies from America, because America is the land of a devil called capitalist. A capitalist would only worry about profit and nothing else we shall say this for the time being.

INFY makes software and you can get INFY’s latest Income statement from here

Similarly you can get income statement of Microsoft from here and IBM from here.

We have chosen Microsoft because the rumor has it that it is very profitable and IBM because, bulk of its revenues come from consulting just like that of Infosys.

And here is the spread sheet that puts all data together so that we can compare INFY, Microsoft and IBM

Here is snap shot of the comparison in image form. Click on the thumbnail to view it.

tax comparison

Now let us discuss the tax.

As you can see, INFY paid a tax of 70 mil USD on an income of 599 mil USD – That is 11.69%
Microsoft paid a tax of 1.17 billion USD on an income of 3.47 billion USD – That is 33.95%
IBM paid a tax of 1.35 billion USD on an income of 5.39 billion USD – That is 25.03%

But matter does not end there. Somehow the figure 70 million USD in INFY tax sounded familiar.

I checked up INFY annual report from here.

70 million USD is equivalent to 303 crore INR shown on page 29 of INFY annual report.

But there is more to it. On page 52 there is small table that mentions that out of 303 crore INR shown as tax, around 247 crore INR is Overseas tax. Explanation of Overseas tax is that it is the tax paid by INFY when employees are deputed abroad. But Income tax regulations under section 91 allow rebates for double taxation. So what is the amount and why is this shown?

Then the wisdom strikes. Yes it is the amount contributed to payroll tax/social security tax when employees work abroad. Social security even though called a tax, it is more like contribution to provident fund. INFY can claim deduction on any contributions it makes to employee provident fund or social security. So how come this amount is shown as tax liability??? Then there is flash of wisdom. INFY does not pay any tax anywhere, just to buy respectability it shows 303 crore INR as the equivalent of world wide payroll taxes it is force to pay when employees get deputed abroad. Strange calculation. Can tax experts comment on this