Infosys in Canada Canada's Justin Trudeau Government imposes fine on Infosys - Why has Canada fined Infosys?

Infosys slapped over CAD 130K fine by Canada citing wealth tax underpayment.

Canadian Government has levied a penalty exceeding 1.34 lakh Canadian dollars (approxiamately Rs.82.lakhs) on I.T. firm Infosys. For purpotedly underpaying employee health tax for the fiscal year ending 31-Dec-2020 as per regulatory filing.

 Infosys received a directive from Canada's Finance ministry on 9th May. The filing stated penalty imposed on alleged underpayment of Employee Health Tax for the year ended 31-Dec-2020 & indicated that a penalty of Rs.1,34,822.38 Canadian Dollars was imposed on the company, rreported news agency Press Trust of India (PTI). Infosys clarified this issue has no sifnificant impact on its financials, operations, or other activities.

What is Employee Health Tax (EHT)?

Employee Health Tax (EHT) in Canada is a compulsory payroll tax enforced on employees in certain Canadian provinces such as Ontario and British Columbia. This tax is computed based on a range of employee compensations including salaries, bonuses,taxable benefits & stock options. Its main purpose is to contribute to the financing of heealthcare services within the respective province. The filing stated, penalty imposed on alleged underpayment of Employee Health Tax (EHT) for the year ended 31-Dec-2020 & indicated that a penalty of 1,34,822.38 Canadian Dollars was imposed on the company, reported news agency Press Trust of India (PTI). Infosys clarified that this issue has no significant impact on the financials operations or other activities.

Infosys in Canada.

Infosys has a significant presence in Canada with several offfice locations throught the country these include offices in Alberta, Mississauga in Ontario, Burnaby in British Columbia, & another in Ottawa, Ontario. Infosys is committed to expanding in Canada by doubling its national job commitment to 8000 by the year 2024. This is in line with Infosys vision to nurture the next generation of innovators locally, for an increasingly digital future. Everyday Infosys enables Canadian companies to harness transformative digital technologies empower employees through learning & upskilling & become more competitive in their business says the company website.

We take a look at past incidents surrounding Infosys -

i) In January, Infosys was fined USD$225 by US taxation authority for allegedly failing to pay the full amount due for the short payment of modified business tax, over two consecutive quarters. Short payment refers to a payment that falls short of the invoiced amount.

ii) Similarly in Aug-2023 the Florida Department of Revenue imposed a penalty of USD$76.92 on Infosys for not meeting tax payment obligations.

iii) Then in October, the commonwealth of Massachussets fined Infosys USD$1101.96 for rejecting family & medical paid leave returns for the first & second quarters of 2023.

iv) In India, in April the I.T. Services major announced that the Odisha GST authority had imoosed a penalty of Rs.1.46 lakhs on the company for claiming ineligible input tax credit. Infosys stated that it had received the order on 22-Apr-2024, issued by the Assistant Commissioner of State, Odisha GST for the collection of a penalty of Rs.1,46,873. The penalty was imposed for availing ineligible Input Tax Credit for the financial year 2018-19, the filing.

v) In January 2023, UK tax authority HM Revenue and Customs (HRMC) and Infosys in which UK PM Rishi Sunak's wife Akshata Murty holds a stake close to 1% were in disagreement over a corporation tax bill of about GBP-20m-GBP, according to the company's annual report. The dispute initially reported by UK Times is one of the several tax issues the copany is facing in various jurisdictions including Australia.

vi) In what was the largest fine ever in an immigration case on 31-Dec-2013 the USA Department of Justice settled with Infosys for USD$34 million. The complaint alleged that Infosyss had engaged in systemic visa fraud and abuse of immigration processes. Specifically it was accused of misusing the 

B-1 bisiness visitor visa program by bringing foreign national employees into the USA to perform work that is not authorised under this classification Infosys was also alleged to have violated regulations concerning the employment of work authorised H1-B visa holders.

Infosys current market state.

The company has a market capitalisation of Rs.5,90,097.73 crore as per BSE. On 18-April, Infosys announced its Q4 results reporting a net profit of Rs79.75 crores, for the march quarter, with total revenues reaching Rs.37,923 crore. The company noted that its year on year revenues in constant currency terms, remained unchanged a saw a sequential decline of 2.2%. For FY-25, Infosys forecast revenue growth in the range of 1%-3% in constant currency terms & anticipates maintaining an operating margin between 20%-22%. Despite expectations of a tepid fourth quarter from D Street analyss due to a downtown in a discretionary spending the I.T. giant reports a robust deal pipeline, reported HT's Mint. However deal closures have been somewhat impeded by slower decision making processes and the impact of furlough periods.