Recent orders
UN And Humaniterian Relation
UN has been useless in implementing a doctrine of humanitarian intervention during and after the cold war
Introduction
The purpose of this research paper is to carry out a critical assessment on how UN has been useless in implementing a doctrine of humanitarian intervention during and after the cold war. The paper focuses on the impact of humanitarian intervention on the international political affairs. It utilizes both secondary and primary sources to assess the subject matter. It is observed that the salient differences between political features of the contemporary international relations are far diverse as compared to what the Cold War world was. During the Cold War period, the global political/economic atmosphere could be described as divided with distinct cultures, only 8% of the countries having free markets and stressing on the power of nations. On the contrary, the humanitarian intervention age came with integration of nations, economies or markets and technologies.
A global paradigm shift has been evident since the end of Cold War towards the close of 80s. During the Cold War period, the global political/economic atmosphere could be described as divided with distinct cultures, with only 8% of the countries having free markets and stressing more on the power of nations among other characteristics. On the contrary, the humanitarian intervention age came with integration of nations, economies or markets and technologies (Garrett & Geoffrey 1997). While it is evident that the world in the age of humanitarian intervention is different from the pre-humanitarian intervention world, humanitarian intervention has had a lot of impact on the international economic operations, political relations, cultural aspects and environmental issues (Edgar & Dauvergne 2005).
Humanitarian intervention is used in context such as processes, perspective and more so in outcomes. It is expressed in various dimensions e.g. from political, economical and socio- cultural point of view. These various ways of expressing humanitarian intervention has led to a lot of controversies on the clear difference between it and internationalization (Gultang, 1997). The study of UN and humanitarian intervention tries to examine its ubiquitous nature basing on the economical point of view. Humanitarian intervention has different meaning when expression is made in conjunction with higher education where humanitarian intervention concerns with convergence of the educational systems which is directed to catering for the needs of world knowledge. According to education systems, internationalization defines the divergent approaches within the various contexts of convergence (Smith, 2000).The literature examines original investigations, other literature reviews, peer reviewed academic literature, research databases, reviews, journals in various academic fields and original manuscripts. These form the secondary and primary sources upon which the backbone of this research paper is anchored.
UN implementation of Humanitarian Intervention after the Cold war
Benjamin & Virginie (2003) note that the integration of different isolated national markets, cultures and political standards takes variety of forms as it tries to distinguish itself from myth, phenomenon or outcome. One school of thought among economists (e.g. Garret 2000) postulated that humanitarian intervention is relativistic in nature as it takes variety of forms. Humanitarian intervention has therefore been viewed as a myth due to its questionable validity in global leadership consensus. Its history has also depicted features that are related to mythical stories as current global economy is considered (Aglietta 1998). The fact that most transnational corporations are no longer under the control of most nations reveals some characteristic of myth. European Union which is a form of regionalization of global zones has the features of humanitarian intervention such as integration and harmonization of diverse regions. Strategies have been put forward by many nations to eradicate dissent in the international business operations while promoting consensus in governance. This indicates that economic and like minded leaders can respond positively to matters concerning nation-state autonomy. The leaders should be in position to relinquish certain powers for the collective benefit of many nations in terms of business efficiency and mutual political good. The European regional global zone, EU has attracted other international organizations found in the Central and Eastern Europe. The impositions that EU has had on members’ qualification are another pressure on the global business operations.
Some scholars have different perspective on humanitarian intervention. Some view free trade and economic rationalism as the basis for humanitarian intervention and that evolutionary advancement in the economic sector aids humanitarian intervention. The economy of nations is the basis of efficient humanitarian intervention across the globe. The multilateral agencies are in the front in designing international regulations that are governing international business operations. Some of the major agencies which greatly influence the international business operations and humanitarian intervention s are World Bank, International Monetary Fund and World Trade Organization. These organizations are designed to protect the economies of nation states and other inter-governmental regions. These agencies have stipulated regulations and leaders whose responsibility resembles that of head of most nation states. The institutionalization of international regulations is quite paramount and that most nations should comply with these in order to enhance efficient humanitarian intervention.
There is a clear link between diverse political dimensions of humanitarian intervention and post-modernity as revealed through spatialization of social theory which commence with feudalism to capitalism to socialism. The inhuman objects are the central theme of humanitarian intervention and it constitutes contemporary networks in the current global economy. Urry stated that computer networks, associational opposition and modes of citizenship are some of the contemporary networks that have had a lot of impact on the process of humanitarian intervention (quoted in Barnet 2000: 93). Some scholars have also postulated that there exists a link between the economic dimension of humanitarian intervention and capitalism and development. It is summed up that cultural dogma of consumerism dominates the economic undertakings; global development can be achieved less effectively. Social democracy is far much better than capitalism if efficient humanitarian intervention is to be achieved. Intrinsic nature of human agency and the norms they have adopted over time has to be modified if humanitarian intervention is to be efficient in the national markets and this calls for constant changes in the policies that are used in day-to-day business and that stakeholders should at all times accept the change of identities. These ideologies have led to rise of controversies and variations of utopianism. Some of the early analysts such as Thurow suggested that capitalism cannot implode in the same manner as communism but that success and prosperity of global business depend on a shift from consumption to builders’ ideology (Thurow’s L. C. 1996) The Future of Capitalism, quoted in Emmeriji 2003, p. 97).
These ideologies contrast with cultural dimension of humanitarian intervention which has the effect of underpinning the influences of cultural imperialism. Clark argues that spread of modernity and resistance to the hegemony of westernization drives humanitarian intervention to fragmentation (quoted in Benjamin & Virginie 2003). This forces most multilateral organizations to adopt protectionist strategies due to the forces of fragmentation. The intellectual difference, then, of forces such as humanitarian intervention and disintegration makes it difficult for much of the world to incorporate into a particular, homogenized world. Many economists have argued that humanitarian intervention has positive impact to economy and especially to international business investors. The major positive impact of humanitarian intervention is that it has led to liberalization of international trade. Expansion of FDI has also been enhanced and cross border financial flow has been made possible. The fact that there is enhanced flow of ideas across border has led to intense competition in the international markets. The combined efforts of different countries in the national markets have resulted in good relations among diverse cultures. These in turn lead to greater competition. Policy decisions concerning diversified cultures have also been achieved through humanitarian intervention and this has enhanced reduction in national barriers that may hinder international economic transactions. Cost is the major concern of all business organization. Humanitarian intervention is effective in the sense that flow of information has been made possible hence cost of moving information has been vastly reduced. Flow of goods and capital across the globe has reduced dramatically. This has eased transactions in the national markets.
Cost reduction is the main benefit that companies derive from participating in shared efforts. Companies also benefit from more efficient compliance efforts that aid in the efficiency of the company which in turn increases the revenue. The efficient compliance of efforts has enables most companies to incur less costs in production due to reduced head count. Humanitarian intervention has also lead to improved quality controls in the organizations. Humanitarian intervention has a lot of shortcoming and hence firms investing the international markets are faced with: Alignment of global culture may be very challenging to the concept of humanitarian intervention. This can be seen from the way different societies react for example through a common quote “westernization,” “alienation” among others (Panayotou 2000). The major problem faced by many firms as they globalize is the difficulty in maintaining the original corporate culture. Maintenance of the cultural identity in the global markets is quite difficult. Firms which are globalizing through joint ventures and partnership led firms are forced to adopt the culture of the native and cultures of the diverse people where their clients operate (Finnermore, 2000). In the same manner, political views are as diverse as the cultural views are. Aligning the political views to reach a balance may not be easy and that is partially why the UN and international bodies like ICCJ face great challenges in the discretion of their sanctioned functions. International firms are faced with the problem of uncertainty on the extensibility of their business strategies and management networks. They are also faced with the problem of inability to solve problems that concerns project in the new areas (Barber & Jihad, 2000).
Impacts of UN Policies on Economic Performance and Living Standards after the Cold war
Humanitarian intervention has a lot of impact on the economic performance in countries which are participating in the international business. Living standards of the people is affected directly due to changes that occur in economic performance in the region. Some of the impacts of humanitarian intervention include increased competition, new technologies, intensive innovation which accompanies changes in technology and specialization in efficient industries. It has also brought about more economic growth which had stagnated especially in most undeveloped countries gets to a point of economic transition. Lastly, there has been a rise of global elite resulting from widening of income gaps due to inability of other countries to attract humanitarian intervention drivers like FDI. The concept of international politics and humanitarian intervention is two issues that are controversial in nature when political scene is considered (Emmeriji 2003). Some liberalism school observed that humanitarian intervention is the same as internationalization and that social labour division in global business environment is quite imperative in most competitive environments. On the other hand pragmatism school argues that humanitarian intervention will give rise to closer interdependence of universal social relationships. This leads to building up of relationship between economy and international politics. Relationship between foreign affairs and domestic affairs should also be established for efficient international business operations and exchange of cultural values. The diverse expressions of the relationship between economy and the international politics does not have any effect on the strategies that international investors should take to ensure smooth running of the business operations.
Humanitarian intervention and international politics are becoming core issues as it determines international relationships that are necessary for international business operations. Different authors have tried to give different interpretation of the implication of globalized international politics which have a lot of impact on the international business. Some points out that international politics and international relations bring impacts on global business operations (Barber & Jihad, 2000). International politics have great influence on the operations of international business. The influence of any political change on international business is no less significant that the influence that are attributed to the individuals. Politics affect the operations of international businesses, interchange of cultural values, free cross-border movement of individuals in the global village (Daniels, 1996). International investors ought to be careful when dealing with long term assets in the global markets due to the risk of expropriation of these assets whenever there is a change in government. The impact is also felt when the existing government make a lot of changes toward foreign investment. Currency has been a challenge to international business. Currency conversion is so hectic if global markets do not adopt one currency conversion method. The idea behind the inability to convert local currency into hard currency has posed a lot of challenges to international business. All these are in the hands of the government at any given time. The stance toward hard currency transfer in a nation might be influence the proper business operations (Cerny, 2001). Political changes that follows transition of government leads to shortfall in the national currency exchange. New government might introduce laws that lead to changes in currency transfer hence infringing the normal business transaction in the national markets (Corbridge, 1999)
International politics affect international business through sanctions that some other states might impose on other countries. It is in relation with this that most developed countries impose sanctions on the third countries in the international markets. Political violence that accompanies national elections affects international business operations. This depends on the site of business operations. If in case sites where international business operations are affected by internal conflicts of the country, then there are chances that the facilities are damage leading to interruption of normal business operations. This is sometime abrupt that no measures have been put in place to offset such crisis. These are very dangerous to international companies as it can lead to stoppage of business operations if substantial resources are damage during the time of violence. The place where the national markets are located should be a country of political stability to foster efficient and effective business operations. The diversity in the political structures that are presented by different countries also affects international business operations (Corbridge, 1999).
International politics can also affect international business operations by imposing sanctions on the new market entrances for new business organizations that are still venturing on new markets. The amount of capital that a company should have at hand for it to participate in the international markets hinders new entrance in the international business (Anton 2000). Most companies are not in position to participate in international business due huge capital that should have. These lead to reduced competition in these international markets hence few companies enjoying monopoly which might least to exploitation of consumers (Barnet, 2000).
Conclusion
International traders are at all time cautious on their business operations. United Nation has a lot of limitations that has a far reaching influence on their operations. Doing business with international countries can lead to downfall of the operations due delays by most governments to settle bills in time. When a government is a buyer, there are a lot of inefficiencies associated with it. United Nations influence international business operations of a country i.e., it can impose an embargo on countries. This limits their ability to import goods hence markets for the global market goods are reduced. If for example a trader had exported goods to a government, but he later realized that embargo has been impose on that government, it has no option other than to cancel the export license of that trader.Most governments have limitations in that wrongful calling of on demands guarantees occurs often. Political change leads to political risks that have direct impact on the international operations. Having carried out the research through careful evaluation of literature, it is justifiable to conclude that whereas United Nations brought a different world after the cold war, it carries both positive and negative impacts and politically, socially, environmentally and economically.
References:
Aglietta, M 1998, Humanitarian intervention and its Impact, International Studies Quarterly, 170-180.
Anton, B 2000, Capital Mobilization, Paris: Economical Studies, 170-200.
Barber, R. & Jihad, N 2000, Humanitarian intervention and International politics, 100-120
Barnet, R 2000, International Politics and Imperial Corporations. Oxford: Oxford University Press, 80-120.
Benjamin, B & Virginie, C. 2003, UN and Humanitarian intervention in Reshaping the Global Economy, New York: Schuster, 30-70.
Boyer, Daniel and Robert 1998, Global Markets, Paris: Economica, 20-68.
Casson, M 1998, International Business and Global Integration, New York: Simon & Schuster, 30-40.
Cerny, P. 2001. Financial Humanitarian intervention, New York: Cambridge University Press, 29-48.
Corbridge, R 1999, Global Integration, Oxford: Blackwell, 26-50.
Daniels, L 1996, Global Vision and Humanitarian intervention, pp.27-45.
Edgar, E. & Dauvergne, P. (Ed) 2005. Humanitarian intervention and Environmental Protection on the High Seas; International Handbook of Environmental Politics: John Wiley and Sons
Emmeriji, L. 2003, cold war and Humanitarian intervention, Columbia Journal of World Business, pp. 45-106.
Finnermore, M 1999, International Politics and International Society, Basingstoke: Macmillan, pp.150-170.
Garret, G. 2000, Cold war and International Politics, Ithaca, N.Y.: Cornell University Press, 20-56.
Garrett F. & Geoffrey S. 1997, Partisan Politics in the Global Economy, New York: Cambridge University Press, pp.129-167.
Gultang, C 1997, Global Glasnost, London: Sage, pp. 90-127.
Mike, F. 1998, Global Culture: Humanitarian intervention and Regionalization, New York: Cambridge University Press, pp.116-160.
Panayotou T. 2000, Humanitarian intervention and Environment. Harvard Quarterly Journal of Economics Available online at http://www.cid.harvard.edu/cidwp/pdf/053.pdf
Peterson, G. 2001, The Global Shift and Internationalization, Ithaca, New York: Cornell University Press, 134-167.
Smith, S 2000, United Nations Law, 130-157.
UMUC-BMGT335-Changing-Mindset-Case-Study
This assignment has two parts.
In part 1, students will be provided a scenario that highlights the critical issues related to a corporate mindset versus that of a small business.
In part 2, students will read an article and provide a synopsis of the article as it relates to the learning organization.
Required Elements to include in the Changing Mindset Case Study:
· Using the template provided, students will answer the questions that follow the case study;
· Provide a synopsis (400-600 words) of the findings related to “Why aren’t we all working for learning organisations?e-Organisations and Peopleby J.Seddon and B. O’Donovan
Required Formatting of Paper:
This paper is to be written using double spaced, 12-point font, and four to six pages in length excluding the title page and reference page;
Title page with your name, the course name, the date, and instructor’s name;
Use headings;
Include references other than the textbook;
Write in the third person;
Use APA formatting for in-text citations and reference page. You are expected to paraphrase and not use quotes. Deductions will be taken when quotes are used and found to be unnecessary;
Submit the paper in the Assignment Folder.
Case Study 1
Name
Institution
Date
This case study focuses on the article titled Why aren’t we all working for learning organizations? The authors of this article came up with this question after revisiting the work done by Peter Senge. This work is titled “The Fifth Discipline.” The authors in this article are reflecting on why people have more learning institutions or organizations around them. After doing this reflection, the authors conclude made by W. Edwards Deming on the critique of Western management practices is applicable to Senge’s ideas just the way it applies to other theorists’ ideas. The authors then went ahead to use Argyris’s model called Double-loop learning and they suggested a way that managers can use to switch to a systems thinking mindset from a command and control mindset so as to achieve or attain genuine organizational learning. According to Senge, learning organizations refer to organizations where people join so that they can continually expand or broaden their capacity of creating results they really desire. The learning organizations according to Senge also refers to organizations where expansive and new patterns or ways of thinking are raised and nurtured. In these organizations, Senge goes ahead to explain that there is setting free of collective aspiration and people continually learn the way to learn together.
With this definition of learning organizations, the authors of this article claim that the intent of the work done by Senge 20 years ago was to get organizations or institutions to shift their minds so that they could produce generative and adaptive learning. The prediction by Fortune magazine was that learning organization was going to be the most successful organization in 1990s. the predictions however, did not come to pass in 2010 and people still do not see examples of learning organizations around them.
At this point, the authors of the article came up with what they believed could be the biggest hint as to why organizations are not all learning organizations as suggested by W Edwards Deming. The authors were contented that the work done by Senge did not inform managers the way to address the deeper layers of connections before they could transform to learning organization. The deeper layers of connections are well explained by Deming who argues that people have been destroyed by the prevailing system of management in organizations. Deming claims that people are born with intrinsic joy in learning, curiosity to learn, dignity, self-respect and motivation. Management has to to put these into consideration so that learning organizations can be seen
Reference:
Seddon, J. and O’Donovan, B. (2010) Why Aren’t We All Working for Learning Organisations. AMED e-organisations and people. 17.2
UK Taxation report
UK Taxation – report
Objectives and Criteria
To attract employees from the competition, an additional cash salary of 10% has to be paid. However, given the current tax environment in the country, several other initiatives can be taken which affect the total money that a new employee earns or saves as a result of the company’s taxation structures.
The following criteria have been used to evaluate each proposal keeping in mind the profile of the target employees:
Tax efficient: the proposals will save on the tax and not result in the employee paying a higher amount or rate of tax because of the incentives offered.
Will be attractive to the target workers, who are mostly in there twenties and thirties; company incentives which are tax friendly and cater to the needs of this audience.
Should the staff member not want some of the perks, the company will also allow some flexibility for the staff member to opt out or make some changes to the package.
Employee stock option plans to be considered with impact on taxation
Proposals
In terms of the various options offered by the employers, the company has to work on the assumption that employees need to be informed about how they can save tax on the cash salary that they get. The second section will deal with the company provided perk and a cost benefit analysis of the same.
Personal Proposals
For the older employees especially those that have been with the company need some help with their tax planning. Such proposals will go a long way in increasing the take home pay for employees. An instance of this can be the tax benefit available as a plus 65 person, could also be applicable for the new experienced hires the company is planning. As pointed out by John Whiting, a tax partner at Pricewaterhouse Coopers for a write-up for the BBC, age is recognised during the tax year. If a person were to turn 65 within the tax year, then the staff can claim the benefits for the entire year.
Savings are a good idea for tax benefits. Tax-free savings are especially applicable for those employees, which either have a lower salary and all who can save via the ISAs’. For incomes under GBP 4800 levels, the income is tax-free and the employee can get a tax break on the interest earnings from their banks.
Withdrawing profits from the company can also be a good option in lieu of salary for the employee. For example for someone earning GBP 15,000 (Redstone Apr 2005 BBC) can partition the earnings into two components of a small tax-free salary of GBP 4500. If the employee qualifies for the “means tested” tax break, there will be no national insurance contributions and there will be no tax on this salary. The balance amount will be subjected to a 10% corporation tax or 105 pounds. This is a significant tax savings. While the deductions at source rules have changed, and 19% must be deducted, this amount will need to be subjected to further tax planning.
Now all these rules are probably something that the employees are already aware of themselves. However, the company may consider deputing the senior accounts staff, over the year to guide staff in planning tax. This would be at no cost to the company as existing knowledge and resources within the company are being utilised. Furthermore this would also benefit the company be aligning the staff and corporation tax planning in the initial years to provide maximum benefit to the employee and the company.
Company sponsored perks and benefits:
One of the ways that the company can directly contribute to the staff salary packages and make them more attractive is to look at the tax benefits provided by the government in the employee benefits.
There are several areas that the company can look at for improving employee benefits. Four of these are:
Food and dining privileges
Transportation
Childcare vouchers
Loan and purchase of assets such as computers, fax machines etc at the employees residence:
These are discussed individually hereunder:
Food and dining privileges: The government has liberalised the dining privileges for employees and food provided to employees at the company’s premises or vouchers provided for the same. Most of the information is given in the Inland Revenue 2005 Guide to employee taxation and implications.
Meals and food vouchers covered under Section 317 mentioned in the guide states that free or subsidised meals provided on the employer’s business premises, or in any canteen
Where meals are provided for the staff generally, or a ticket or token used to obtain such
Meals are exempt from tax so long as these are not too lavish. Unless undertaken for purposes of entertaining the company’s clients and certain other non-regular events, this is not applicable to eating at restaurants unless again, we have a contract with a restaurant to provide the same. Also these benefits must be universal; we cannot have a specific element in the contract but need to provide this as a general benefit to all employees. As per section 89 mentioned in the document, if we were to provide meal vouchers, these would have to non transferable otherwise that entire benefit will be taxed in the hands of the employee even though the company will be able to claim a tax break from the expense.
Transport cars and bicycles:
The government has provided several tax benefits for environmentally friendly initiatives undertaken by the company. They have drastically reduced taxation for cars with lower fuel consumption as well as for the use of bicycles to travel to work.
Cars:
A table for calculation is attached at the end. Cars with a low CO2 emission and with a lower engine capacity are exempt from the fuel scale charge (The Automobile Association) used to calculate the private fuel benefit tax. The calculation is explained hereunder:
A fixed amount of 14,400 is multiplied by the fuel scale charge for purposes of calculating the benefit from the use of a company car. So the amount is calculated as £14,400 x fuel scale charge % = total benefit to the employee which is taxed at the applicable tax rate for the employee. So tax rate x benefit = total additional tax to be paid on the benefit of a company car.
Percentage charge relative to CO2 emissions (before discounts) (Source the AA)
2005/06 CO2 Petrol Diesel
135
140 0.15 0.18
145 0.16 0.19
150 0.17 0.20
155 0.18 0.21
160 0.19 0.22
165 0.20 0.23
170 0.21 0.24
175 0.22 0.25
180 0.23 0.26
185 0.24 0.27
190 0.25 0.28
195 0.26 0.29
200 0.27 0.30
205 0.28 0.31
210 0.29 0.32
215 0.30 0.33
220 0.31 0.34
225 0.32 0.35
230 0.33 0.35
235 0.34 0.35
240 + 0.35 0.35
It is interesting to note that the charge is zero for environmentally friendly vehicles with low CO2 emissions. So if the company were to provide small cars like the small models from Japanese manufacturers, there could be substantial savings as the entire cost of the car is eligible for a 100% depreciation claim in the first year. For a small car costing GBP 7000, I believe the company can negotiate a bulk discount of 10% with the total capital outlay per employee for the purchase being £6,300.00. Given the group insurance policy (to be renegotiated) the cost of insurance and maintenance for the year will amount to GBP 750. Costing the capital’s opportunity cost at 4.75% as per applicable rules, there will be an annual interest cost of GBP 300, however allowing for a tax shield on the interest the company will have a net Interest cost of £209.48 with the total cost of GBP £959.48. However, as in this example, the company can claim back 100% of the value of the car, the total benefit to the company will be GBP 5340. In addition, the staff has the use of company car for personal use. The company may, if we so wish may charge the staff a fixed amount for the personal fuel to defray a part of the cost.
Details Amount
Purchase Price £ 7,000.00
Company Price@ 10% Discount £ 6,300.00
Insurance £ 350.00
Maintenance £ 400.00
Interest Rate 4.75%
Interest cost £ 299.25
Tax Shield @ 30% £ 89.78
Total Interest Cost £ 209.48
Total Cost to Company per annum £ 959.48
Depreciation Allowance 100% £ 6,300.00
Net benefit £ 5,340.53
Bicycles:
Bicycles can be purchase by the company and loaned to the staff free of charge provided they are used for transport to and from the place of work. Given the profile of the people the company proposes to hire, this would be an additional expense saving exercise and the company will get the depreciation benefit as applicable to equipment. The company may consider going in for a GBP 300 multipurpose bicycle for employees and claim back 25% of the cost as annual depreciation (Brodie 2004).
Transfer of used assets:
Items like bicycle and computers / fax machine can be loaned to employees and the company can enter into a buy-back agreement with the employee. During the life of the asset, there is not tax on the loan of asset to the employee and the company can claim depreciation each year. At the end of the life of the asset or when the company decides to upgrade or if the employee leaves employment, the asset can be sold back to the employee at the current market value of the asset without incurring any tax liability (Inland revenue 2005).
Particulars Bicycle Computer
Purchase 300 1000
Maintenance 20 20
Interest cost (cost of capital @ 5%) 15 50
Tax shield on interest payment 4.5 15
Total Annual Cost to company 30.5 55
Standard Life of asset 4 3
Depreciation 75 333
Net Annual Benefit to company 44.5 278
Residual value after 3 years 75 0
Childcare Vouchers
The company can set up a scheme for providing child care vouchers to employees to a value of GBP 50 per week tax free in the hands of the employee. This amount can be adjusted against their salaries so there is no cost to the company and the employee saves to the extent of their tax rate on their salary. For an employee earning GBP 20000 per year, this can be as high as GBP 572 (details table below). Tax savings will be higher for employees in the higher tax bracket.
Items Details
Tax free voucher 50
Weeks paid 52
Total Amount 2600
Marginal Tax rate 22%
Tax saved 572
These tax saving options are known to the software industry and as such, depending on circumstances, can be adopted by the competition to retain their employees or lure them back with higher salary packages and benefits. The other option the board might consider is ESOPS (employee Stock Option and Plans). These can relate to an option issued to the employee, the company shares themselves and “phantoms” or scheme where simple price changes in the company share price is netted out and paid to the employee (HMRC 2005).
The first consideration under the existing rules is the cost of setting up such a scheme. While the company can claim all costs as expenditure for setting up the scheme, the same have to be added to the taxable income of the beneficiary employees. The assumption here is that all the activity has to be priced as if it were provided by a third party hence for a phantom plan a share purchase and sale is implied, and the other stock option and share preferential purchase is treated as a regular stock market transaction with the relevant accounting costs and brokerages payable.
Furthermore, the value of the benefit must also be fair market value (of the share or option) and for taxation purposes, the benefits such as the share option have to be adjusted for their fair market value as well. So if compensation were designed to include ESOPS, the employee would have to pay tax the price difference between the applicable and current market price of the option. On exercise of the option any gain would be treated as a normal market exercise of the option.
Actual cost of the exercise can be computed depending on the structure of the option as well as the exercise time. Overall, they would have to bear the cost of the ESOP structure however there is a tax break available on this. Employees will bear the cost however for an Exercise time of 3 years, there can be a substantial gain for them as well.
References: