Not a day goes by without taxes being mentioned

The first item is the news that Bharti Airtel, a top Indian mobile phone carrier, has been slapped with a 10.67 billion rupee (S$271 million) tax demand from the country’s tax office over payments to international telecom operators. It relates to the applicability of withholding tax on payments made to those international operators. Now obviously Bharti is not sitting back, it’s clearly going to challenge that massive tax bill. I don’t know much else about this, but I’ll be looking forward to finding out more about this case.

The other much bigger headline is Mr Mitt Romney’s tax returns. Because much of his earnings arise from stocks, he gets taxed on the capital gains. The capital gains tax rate is lower than the highest income tax rates, hence he enjoys a lower effective tax rate than people like Warren Buffet’s secretary. It’s the same dilemma everywhere really. Governments want to help the economy grow, so they lower capital gains tax in the hope that people will invest in the various properties and the stock market. However, at the same time, the reduced capital gains tax hugely benefits people such as hedge fund managers, wealthy investors etc whose bulk of their income is in such assets and stocks. These high net worth individuals also argue the old chestnut, that if taxes are raised, they’ll just move somewhere else so a little bit of tax revenue is better than none at all. Then bring in the middle class that feels that they get squeezed dry, an incumbent that is struggling to get re-elected and you’ve got yourself the latest developments in the US 2012 Presidential Elections.

Mr Rubenstein from the Carlyle Group was reported to have said, “If you change the law, we’ll pay the taxes.” This is true to a point really. Perhaps he should have added, “But if you change the law too much for our liking, we’ll be calling our tax advisers and then you wait and see how much taxes you get to collect this time.” The fact of the matter is that the high net worth individuals have so many options at their disposal that they will almost always ensure that they get the best deal no matter the situation.

In other news, just the other day someone who won’t be named spelt Texas as Taxes. Which got me thinking about how taxing Texas’ taxes are. Ok I better stop now.