Infosys accused of dodging tax in U.S.

Wednesday, 10 March 2004, 20:30 IST
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BANGALORE: Infosys Technologies Ltd, the Bangalore-based global IT firm, Tuesday denied it had sought tax relief from local authorities on the projects it executed from its US headquarters at Fremont in California. In a written response to media reports in the US and India, the company has clarified that it had filed returns and paid taxes in the California state as per regulations laid out in the domestic tax regulations. "Infosys is not requesting for any tax breaks or incentives but has requested for a 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 & Taxation Code Section 25137 has been mentioned in the filings with the Franchise Tax Board," the statement noted. The company also claimed that it paid taxes in all jurisdictions where ever it operates in accordance with the domestic regulations and in conformity with the internationally recognised practices. Explaining the company's stand on the issue, Infosys spokesperson told IANS here that the tax payment pertained to fiscal years 2001-02 and 2002-03. "In accordance with the provisions of the state laws, we have paid $1.3 million towards tax liabilities for the two-year period on the projects executed in the US. "At the same time, we have requested to permit a filing methodology under section 25137 that would have restricted the company's tax liability to $180,000 instead of $1.3 million as per the standard procedure. "Since the request has not been granted, we have complied with the laws and paid the tax dues for the period. We are in discussions with our tax consultants on our future course of action," the spokesperson stated. Asked what prompted Infosys to seek such a filing methodology that was an alternative to the existing standard methodology, company sources said the permission was sought as per the provisions under the relevant section. "There are also instances where firms have been granted such permission by the authorities concerned to seek lower tax liability. Our request was in the same spirit, keeping in view such precedence," a source affirmed. According to media reports, Infosys had sought tax relief on the contention that two-thirds of its project work was undertaken offshore in India and as a result, there was a differential in the wages paid to its staff in California and India. It is learnt that California lawmakers were critical of Infosys' stand even after its request for relief was rejected by the California Franchise Tax Board. The reports quote California Tax Reform Association director saying: "It takes a lot of nerve to ask such tax relief considering the context in which they operate." The spokesperson also denied there was any move to relocate its North America headquarters to Canada from the US. "We already have full-fledged operations, including a development centre at Toronto in Canada," she added.
Source: IANS