Tax Consequences of Compensation Policies
AbstractThe importance of compensation policies and reward structures bears direct relationship to the burden imposed by the incidence of income taxation. When, as at the present time, inflation and substantial tax rates erode an in dividual's earning, indirect compensation and devices to reduce income taxa tion assume greater significance to all wage earners. In this paper Mr. Krishna examines several alternative schemes to direct remuneration which have the effect of minimizing current taxation and deferring the incidence of taxes to some future time period, thereby mitigating against the ultimate erosion of ear nings. The emphasis of the paper is on the deferral of tax and indirect compen sation schemes, and is premised on the principle that deferral is tantamount to tax saving.
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