Details

Case

Tax Planning and Employee Benefits at FABR

Naim Sipra

INDUSTRY : Institution

AREA : Accounting & Control

ORGANIZATION : FABR

LENGTH : 7

LUMS No : 01-368-92-1

PUBLICATION YEAR : 1992

KEYWORDS:

Tax Planning,Employee Benefits,FABR,Accounting & Control,Institution

DESCRIPTION:

Kamran Omar, Director Research at FABR - a non-profit NGO, had to decide whether to give his employees a raise by increasing their basic salaries, or by giving them some reimbursable allowances. The problem was that income tax was calculated on the basis of basic salary, so any increase in it would be undermined by taxes. But at the same time the employee provident and pension fund benefits were also linked to the basic salary. The main objective of the case is to provide a different value problem than what the text books normally provide. The case also highlights the importance of making assumptions and the role of sensitivity analysis in typical real world problems. The relationship between the discount rate and inflation rate can also be discussed in the context of the case.

LEARNING OBJECTIVES:

This case has been written for the financial analysis courses, though it may also be used as an exercise in the computers application course. The main objective of the case it to provide a some what different time value problem than what the text books normally offer. The case should also highlight the importance of making assumptions and the role of sensitivity analysis in typical real world problems.

SUBJECTS COVERED:

Accounting & Control