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Egat may pay IPO taxes for its employees
[February 09, 2006]

Egat may pay IPO taxes for its employees

(Bangkok Post (Thailand) (KRT) Via Thomson Dialog NewsEdge) Feb. 9--Egat Plc may tap its retained earnings to offer compensation of 1.8 billion baht to cover taxes paid by employees subscribing to its employee stock-option programme.

Late last year, Egat sold 552 million shares to its staff for 10 baht per share. The share offering came before Egat's planned initial public offering of 1.245 billion shares, priced at 28 baht per share.

The Revenue Department, ruling that the employee shares received were an employment benefit and represented taxable income, said staff needed to pay a 10 percent withholding tax on the gains received based on the difference between the 10-baht subscription price and the 25.41-baht book value. Overall, 1.818 billion baht in taxes was collected on the scheme.

The tax payment stands despite the fact that the Administrative Court ordered the IPO suspension the day before the subscription period was to begin.

Egat employees have questioned why taxes should be charged given that no gains were realised and the shares have yet to be listed on the SET, particularly given the Revenue Department's decision to waive taxes for Panthongtae and Pinthongta Shinawatra on trading of Shin Corp shares made out of the market.

One labour union member said staff believed the taxes should be refunded if the IPO remained stalled.

The Egat president Kraisri Karnasuta said the utility and the Finance Ministry were discussing ways to assist employees.

Somkuan Yavichai, an Egat union leader, said executives had sought to explain that the IPO gains and the case of transactions made by Mr Thaksin's two children had taxes calculated under two different sections of the tax code.

Revenue Department officials acknowledge the fact that taxes charged for unrealised gains on shares received under an Esop plan raised questions.

The Esop case is covered under Section 40 (1) of the tax code, where benefits received from an employer are defined as taxable income. This interpretation, where shares received under market value through an agreement with one's employer, was outlined in a 1995 tax ruling.

For the Shin shares, the department applied Section 40 (4), and argued that no tax liability was incurred for shares sold below their actual market cost.

Sirot Sawadpanish, the director-general of the Revenue Department, said for Egat, taxes could not be refunded even if the shares were not listed on the market.

By Yuthana Praiwan and Wichit Chantanusornsiri

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