Should tax laws be more stringent for celebrities?

New Delhi: The Comptroller and Auditor General of India (CAG) has claimed that cricketers Sachin Tendulkar and Sunil Gavaskar have not paid all their taxes, due to provisions of tax deductions wrongly applied by the Income Tax department.

Sachin Tendulkar was apparently given exemption on tax from income that he received from endorsements. The CAG has now stated that it wants a reassessment of Sachin's income between the years 2000 and 2003.

The shortfall of taxes that they are supposed to have paid comes to a whopping Rs 4.42 crore.

The CAG has also accused the BCCI of running only for the personal benefit of its office bearers and said that the BCCI should have been charged Rs 60.3 crore more in taxes than it has been.

The question that was being debated on Face The Nation was: Should tax laws be more stringent for celebrities?

On the panel to try and answer the question were Director Collage Sports Management, Latika Khaneja; and Tax Consultant, Subhash Lakhotia.

Tax Planning, Not Tax Evasion

Latika Khaneja was very clear when she said that she believed there was a difference between tax evasion and tax planning.

"I think that laws should be the same for all people. Most people feel that their tax is being planned and that the exemption is given from the I-T department, so to say that the celebrity is evading tax is slightly irresponsible on the part of the media," she stated.

Subhash Lakhotia agreed saying that all taxpayers were equal in the eyes of the law. "If someone is a celebrity, it does not mean that he has to necessarily be given a special provision. Equality is the rule of the law," he said.

But the initial poll result on the show suggested that 84 per cent of the people who sent in their responses were in favour of stringent tax laws being applied to celebrities.

Rebate Or Deliberate?

Despite the poll result, Khaneja stressed on the fact that people must understand that it was not a deliberate attempt at tax evasion on Sachin Tendulkar's or Sunil Gavaskar's part.

Lakhotia however, stated that the reason why people wanted more stringent laws was the fact that they look up to the likes of Sachin Tendulkar as a role model and a role model should always be someone with a clean record.

The charges that have been levied against Sachin Tendulkar are two-fold. One suggests that he could have been wrongly exempted from tax - in other words, the deductions allocated to him have been more than what is allowed under Section 80 RR allows for.

The second charge is that he is supposed to have also filed a certificate that suggests that he is entitled to that claim. CAG's report suggests that Sachin has not filed that certificate and the tax that he has not paid up comes up to Rs 3.62 crore.

So does this make Sachin liable in the eyes of the I-T department?

To this Lakhotia said, "What is needed are the papers filed with the I-T form, the audit certificate and form number 10 H. These will prove whether someone has filed wrong returns or not."

Endorsement Money, Not Professional Fee!

Section 80 RR was introduced in 1970 to encourage authors, musicians and actors in India to project their activities outside India with a view to contributing to greater understanding of out country and its culture abroad. It was also introduced with the view of augmenting our foreign exchange reserves.

In the year, sportsmen were included under this section as well. The Government justified this saying: "With a view to contributing to the greater understanding of out country and its culture abroad, augmenting our foreign exchange reserves and allowing our sportsmen to go abroad and with a view to encouraging our sportsmen and athletes to compete in international events and win laurels for our country".

Now, the point that the CAG seems to be making is the fact that the money, which Sachin Tendulkar has received, has come from advertisements and not by competing in international events.

"I think that it depends on what Sachin's tax planners are advising him. But I still think that it is unfair to suggest that Sachin did his best to evade tax. I think the mistake lies with the I-T officer who suggested this exemption, not with Sachin," Latika Khaneja repeated.

Unfair Exemptions

But most viewers feel that celebrities are earning in billions and that these are very flimsy grounds to get exemptions from. The country wants them to go out and win laurels whereas they are earning their money from advertisements and that is a tad bit unfair.

To this Lakhotia agreed saying, "If you go through Section 80 RR, one important word is 'income derived in exercise of the profession, not otherwise'. So if Sachin is playing and making his money and brings credit to the country as well as foreign exchange, then there is no problem in getting exemption, but in this case, the income is other than exercise of the profession and therefore it is taxable."

Latika Khaneja managed to get in a last word in Sachin's defence saying, "When a player goes out to play for his country, the income that they derived is taxable. If there has been some ambiguity from the tax department on other sources of income, then it simply needs to be clarified."

She said that it would be foolhardy for players to evade tax given the spotlight that they are in. However, she said that she agreed with Subhash Lakhotia and that equal laws needed to be exercised for all.

SMS Poll Results: Should tax laws be more stringent for celebrities?

Yes: 85 %

No: 15%

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