ISSUES TO BE COVERED BY THE PROPOSED COMPANY LAW
I am herewith presenting some of my personal views to be discussed with regarding the Company Law.
- COMPANY LAW
- The Company Law has to consider the following issues:
- FACE VALUE OF SHARES: There should be uniformity face value of forms @ Rs.10/- each and should not have any other face values so as to have an operative analysis with regarding RONW, EPS Book Value, PE Ratio, ROC, etc.,
- ACCOUNTING YEAR: All the Companies should have a uniform of Financial Year from April to March for the purpose of uniformity.
- INTERNAL MANAGEMENT: Every Sections of the Company has to be under the control of accountable, professional who is responsible for organization in the process of Internal Administration. The International Management should have standardized form for smooth functioning and proper information of the management on uniform basis.
- COST ANALYSIS: Every Company has to disclose the cost analysis and overheads in the process of comparison with overheads of industrial performance.
- VALUATION OF ASSETS: All the Assets and Liabilities periodically on the basis of rate of inflation for correct calculation of RONW.
- REMUNERATION TO MANAGEMENT: All Companies should allocate specified portion of its profits as remuneration to the management who are the persons behind successful functioning of the Company. So that the remuneration in the form of sharing profits will give the encouragement to the efficiency and punishment to the inefficiency.
- CHANGE OF MANAGEMENT: When there is a company incurs losses consecutively for 3 years or more, there should be the change of management. So that the organization will be protected and the interest of Creditors, employees and all other connected activities will be protected instead of closing of the unit and handling over to Financial Institutions.
- CAPITAL PROPORTIONS: The Management should have minimum @51% of capital of the company so that they can enjoy the success in the form of more profits and feel the pinch in case of loss.
- PLACEMENT: Every employment of the company has to be accommodated with persons of accountability, persons of quality and performance irrespective of any caste, religion, social backwardness.
- INFORMATION TO THE SHAREHOLDERS: Every company should be asked to provide information in uniform format regarding the annualized values of the share, RONW, EPS, PE Ratio, ROC and Liabilities of the Company. So that Investors can compare with industrial performance.
- INDEPENDENCE: Board of Directors, Advisors and others more importance should be given to their efficiency rather than independence, because all the Companies are performing for commercial values.
- CAPITAL MARKET:
- SHARE IN PROFITS: Every Company should prescribe some percentage of profits to the shareholders in the form of dividends and the dividend disclosure need not be at the discretion of the Management.
- ACQUISITION AND MERGERS: Every Company should be asked to have tie up agreement for acquisition or merger with any other Company instead of going for liquidation, since the liquidations leads to erosion of entire share of capital, loss of employment and loss of opportunities to the Dependent Activities.
- DE-LISTING: No Company should be allowed to duelist from the stock exchange since that is the only option available to the investor who wants to enter or exit into the share capital of the company at reasonable prices.
- INFORMATION: Every Company should provide the basic information to the investor with regarding the Return on Net worth, Book Value, EPS, PE, Ratio, ROC etc., of the Shares and all that can regularly adjusted and annualized for quarterly results.
- ACCURACY OF INFORMATION: Every Company should provide accurate information to the shareholder and any difference has to be seriously explained by the International Management.
- SOCIAL OBLIGATIONS
- RESOURCES: Every Company has to maximize the Productivity of the Resources utilized in the process of Manufacturing, Marketing, Expenditure etc., The Resources may be in any form like Raw Material, Labor, Capital of the Investors, Management Capabilities and Administrative Performance.
- WELFARE: The Company has to look after the Welfare of its Employees, Customers and Society at large, in the form of helping the needy by providing Health, Education, and Employment Opportunities to the deserved.
- POLLUTION: Every Company has to maintain the echo balance by not creating loss to the environment and maintaining echo balance.
- MARKETING: The Company should not indulge any window dressing practice and should be based on the quality of its Product and Price to the customer’s satisfaction i.e., it should not spend more on Advertisement and not to increase the Sale Price.
- LAW OF THE LAND: Every Company has to maintain, oblige and Co-operate with the Rules and Regulations made by the Government for Collection of Revenues i.e., Taxes and Utilizing of Resources, Payment of Dividends to Investors, Remuneration to Workers, Reward to Efficiency of Management and all other Sections of the Society.
- INVESTORS PROTECTION: Every company has to look after the interest of the investors by assuring them regular income, safety of investment and opportunity to withdraw with minimum loss. Investor’s confidence is more important.
- VALUATIONS: The companies should not be allowed to value its net worth for calculating premiums, at the time of new issues, mergers, acquisitions, public issues, borrowings, exports, etc. The valuations have to be made independent authorities which are not known to the management, selected from independent source, independent panels from those who are associated with the company. Investors lost huge money due to overvaluations, disclaimers, incorrect information’s, incorrect projections, etc. The above issues may be considered, if feel appropriate, to communicate to concerned authorities.
THE NEW INCOME TAX CODE
According to me the following are the some of the issues which are to be covered by the proposed New Income Tax Code under various areas without increasing the rates of taxes with the help of increasing the administrative compliance and voluntary compliance by tax payers:-
Welfare of Tax Payer: One-third portion tax paid may be allocated as FUTURE
DEPOSIT without interest which can be utilized for development of infrastructure projects and other long period requirements. This will ensure safety and welfare of the taxpayer for the future years.
- Returns: The returns to be filed by tax payers should be asked to file with complete and correct information and computation of tax payable according to the provisions of Acts, any wrong particulars and wrong claim should be punished be severely.
- Information: Information should be provided by the tax payers should be made compulsory to include the details of Assets acquired, Liabilities reduced, Major expenditure like Foreign Travels, Functions etc.,
- Verifications: Every information provided by the tax payer has to be verified which filed and cross checked with details with the details filed with various departments like local taxes, financial institutions, labor departments and all other concerning authorities. The difference if any should be punished severely. Also the tax payer as to be asked to provide the reasons for difference and opportunity may be given for reconciliation for the difference.
- Checking: Every return filed by the tax payer has to be verified by the department in every angle of statutory and legal compliance. Any difference or excess claim should be inform and ask to reconcile, explanation for the difference. Under the head of legal compulsion to accept the returns filed.
- Timing: The time limit for verifying or cross checking in return should be allowed within specified time but not afterwards under these circumstances the department has to be more active with regarding administrative steps required and disposal of returns and verifying legality of made by the tax payers which may cause heavy burden on the department. Under such circumstances it advisable to ask the tax payer to submit the legality of the claim made from any responsible and accountable authority or person which will reduce much of the burden of the revenue department.
- Encouragement: The tax administrative should work under such circumstances that the Honest Tax Payer should not transform into dishonest due to the every enthusiastic steps taken by the Tax Administration. It is important to note that many of the tax payers want to be honest in paying taxes. The tax payer should be protected for the details disclosed in his returns filed except any deviation is noticed by the department. He should not be asking to substantiate with the evidence which are impractical and beyond his control.
- Tax Base: Tax base can be widened by covering many areas which are not yet seen by the revenue department due to lack of time and the hard work required to utilize the information to increase the tax base.
- BANK TRANSACTIONS: Firms will have number of accounts, Balances, Transactions but not disclosing all the accounts and the transactions of all accounts.
- CROSS VERIFICATIONS: There should be a system of cross verification of information collected from other departments, accounts of creditors, debtors, purchases, sales, outside dealers whether the same reflects in the accounts of the outside dealers.
- TAX RECOVERY: Arrears over looked, properties and attached and allowed to be sold. Much stress made on small amounts and number of entries. Big sales with arrears in the names of partners, family members, are over looked.
- VARIOUS REPORTS: People, firms, companies file different reports for the same year to different agencies like Income Tax, Sales Tax, Banks and Financial Institutions, Insurance Companies etc.,
With the result the Government is not collecting tax correctly and innocent tax payers are paying more tax. The above expenditure can be dismissed and taxed since it is illegal.
The effect is very high and not to be allowed to go. Illegal planning should be punished.
In the case of arrack cases also many people received huge refunds by wrong partners compared to license names. The same can be recovered. Many of your officers are not going through the legal provisions for the reasons best known to them. This can be stopped to collect and recover the tax wrongly refunded.
STEPS REQUIRED
- Cross Verification
- TDS Returns Verification
- Extracts from Banks, LIC., Govt. Securities
- Compulsory filing of funds flow, capital fund account and statement of affairs of assets and liabilities along with Return of Income.
- Any additions to the assets, Deletion of Liabilities should be disclosed and explained with evidence.
- Investments, Policies, Deposits, Shares all put together by each person to be permitted by the department above THRESHOLD limit.
- TDS to be made Compulsory above THRESHOLD limit.
- Unbiased and judicial approach by the department.
- Only the registered value should be taken as the purchase price.
- Every Investment/acquisition of asset is to be brought to the notice of the department.
- The Department has to verify each and every aspect, while confirming the Tax Computation.
Process of Increasing the Revenue and Administration
I am presenting my personal views for the consideration of the govt. in the process of increasing the revenue and administration of the same.
The administration which results into:-
“Transforms the dishonest as honest – is Best”
“Remains the honest as honest – is honest – is Good”
“Transforms the honest as dishonest – is Bad”
Therefore, the honest tax payers should not be doubted on the particulars provided unless evidence is available contrary.
- Less has to be collected from more instead of collecting more from less i.e., widening the tax base covering all tax payers of similar nature. There by reducing the tax rates.
- Forex Reserves:- High forex reserves results into:-
- Face unforcing demand for inforce.
- May be utilized for repayment of foreign loans and advancing fresh loans. Thereby, changing the character as loan accepting into loan advancing nation.
- Conolidates the rupee value gradually .Thereby, increasing exports and reducing the imports in the value of rupee. High process of exports leads to payment of high prices towards raw-material purchased, employees and others…
- SERVICE TAX: The rate of service tax may be reduced to 2% from 8% and collection process should be covered from all of similar nature but not on selective basis.
- Rates of taxes:-The minimum payment can be started from Rs.120000/- without considering the savings, rebates, exemptions etc., which results into no savings in govt. securities. Thereby, reducing the burden of interest.
- Less has to be collected fro more instead of collecting more from less i.e., widening the tax base covering all tax payers of similar nature. There by reducing the tax rates.
- More concentration on TDS.
- More areas to be covered for widening the taxpayers like Insurance payments, bank deposits, house properties, business organizations, investment in shares and bonds.
- GIFT TAX,ESTATE DUTY & DONATIONS:- All these transactions may be taxed in the hands of beneficiaries at maximum marginal rate to avoid change in the nature of transactions. Since organizations are running purely for commercial purpose and there is a benefit to the beneficiary.
- PETROL AND DIESEL PRICES:-
- These used to be deficiency in oil pool a/c before the oil prices are brought to the effect of market conditions.The difference was used to be the burden on annual budgets. At present, the burden (or) benefit is passed on to the customer.
- The prices has increased due to increase in dollar rate when compared to the previous years.
- DIS-INVESTMENT:-The govt. has taken several steps for dis-investment in public sector undertakings since the organizations were facing problems of ;-
- Accumulate in losses
- Unable to compete with the open market.
- Unable to take immediate decisions and no accountability.
- Burden on annual budgets due to losses and interest to be paid on savings of the public for investment.
- The govt. cannot carry on the commercial activities there by taking risk with public money.
- With regarding disinvestments in profit making units, the govt. may not get the same price after some time, due to emerging similar private organizations. Thereby, reducing the existing profits. Since the monopoly enjoyed by the public sector undertakings does not exist.
- INFRA-STRUCTURE:- The govt. should concentrate on long term projects like national highways, interlinking of water resources for future benefit Infra-structure facilities for industrial commercial organizations like export zones, ports, commercial trade parks which are social in nature which are useful for commercial organizations.
- SAVING AND MUTUAL FUNDS:- The govt. has reduced interest rates for reducing its burden and to discourage savings and transform as the investment habit directly by the individuals. Thereby, making the people to feel the risk of investment.
- WELFARE:- There should be more allocation towards welfare of the individuals like providing land, houses, sources of earning income on permanent basis.
- ROLE OF BANKS:-In my opinion the banks has to grant only personal loans depending upon the investments, income, assets of the individuals. Since all the organizations are maintained by individuals only. The persons who manage the affairs of the organization will feel the pinch of loss and make the organization successful.
Regulatory Guidelines towards proper accounting statements
According to me the following are some of the steps required for proper Accounting Statements.
- INTERNAL MANAGEMENTS:- Entire administration should be in the hands of Professional and accountable Persons. They should be made responsible for any irregularity in the area of their administration for Eg. Manufacturing section headed by Cost Accountants, Marketing headed by MBA with Marketing, Finance & Accounts by Chartered Accountants,
etc.,.Internal Management should be made more strong, accountable than relying on externally appointed persons. Their opinion can be used as Guidance only. - AUDITORS:- The management should not be allowed to appoint the auditor for the following reasons since the loss incurred to the organization in not the loss only to shareholders but also it effects the following areas: –
- Waste of resources.
- Loss to creditors, financial institutions.
- Loss to customers, distributors, dealers.
- Loss to employees due to loss of employment.
- Loss to suppliers or raw materials.
- Loss to government as a whole.
- Loss to industry as a whole.
- Loss to image and goodwill of the group.
- Loss to investor’s confidence at large on corporate sector.
- Loss to net wealth of the company.
- Loss to productivity.
- Loss to quality.
- Loss to development as a whole.Therefore all the auditors should be appointed on employment basis only.
- COST ANALYSIS:- Every Organization should appoint a Cost Analyst who will guide the organization after analyzing the information obtained from the organization for giving proper guidance for Cost reduction, improving productivity, waste reduction etc.,. This appointment also should be on empanelment basis only.
- MANAGEMENT INFORMATION SYSTEMS:- Standardization formats, Standardized information should be passed on compulsorily to the management at regular intervals. The information should be correct & comparable. For wrong information the punishment must be severe.
- SUPERVISION:- The top management should regularly supervise the internal management and information systems and any deficiency should be plugged. PLACEMENT:- Every placement has to be made according to Qualification & Experience
only. Correct person at correct place with correct powers will give the best results. - ACCOUNTABILITY:- The responsible person should be able to be identified at every stage from top to bottom. So that he can be made responsible. Accountability should be at all levels whether lower or higher.
- PERFORMANCE:- At every stage the performance of organization as a whole and individual constituent has to be analyzed so that the inefficient will be substituted.
- CAPITAL PROPORTION:- The top management should be asked to have controlling capital contribution. So that they feel pinch of the loss, enjoy the fruits of the gain.
- POLICY DECISIONS:- Policy decisions and objectives to be achieved are to be decided at the top level of management like the Board of Directors which should be asked to be followed at all levels of management & at lower levels.Overall, the internal management should be made more responsible & accountable for the success or failure of the organization.