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.
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