Money or Motherland?

I recently read about VC firms asking the founders of potential investee company to register in a developed country for the ease of doing business in general, and for friendly corporate tax in particular.

In that scenario, profit making startups doing business in India become tax payers to a foreign country when foreign funds invest in those companies. That looks like win-win for all as these companies create jobs in India and hence create individual Indian tax payers while they pay relatively less tax to a foreign country and increase profit for the investors.

There is no doubt India needs to improve on ease of doing business and have a business friendly tax regime in addition to drastically reduce corruption and bureaucratic processes. We also need to strengthen our laws for intellectual property rights.

Recently, in the budget this year, Indian finance minister announced gradually reducing corporate tax to 25% over 4 years to rationalize it. This is welcome.

That said, asking a company doing business in India to change its domicile to a foreign country seems like saying, we will invest in you, if you call my mother(land) yours and pay her 20% of your earnings than paying your mother(land) 30%. That is where companies seeking investments need to ponder if it is OK to deprive one’s mother(land) of 30% of earnings and pay a foreign country 20% to save 10% for themselves and their investors. This is where businesses need to have a heart over mind or financial acumen.

Thank you for reading. Shall highly appreciate your feedback.

Jai Hind!


Location: Nagpur, Maharashtra, India

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