'Push for single-window system'

by Gorakh Tiwari, Director, Athena Executive Search and Consulting

Dear Mr Finance Minister,

The existing tax structure and regulatory controls are the two biggest hurdles that rein in small enterprises. On the tax front, the structure needs a drastic and dynamic revision if we want our SMEs to grow.

Small firms need more money to grow operationally. If we are subjected to the same tax structure as big firms are, smaller players will never be encouraged to innovate, engage in R&D and reinvest in business growth.

There must be a separate tax structure for firms that are worth less than Rs 50 crore. Since there isn't, small enterprises are paying as much as 35 per cent of their profits as tax.

Policy Initiatives

We also need more policy initiatives like tax holidays for investment in smaller cities, which will spur growth and bridge the gap between the urban and rural sectors.

Also, we must seize opportunities to make India a favourite destination for global firms by formulating forward-looking policies and tax structures. For MNC clients, the biggest worry is retrospective tax and too many regulatory controls. There should be one unified agency that helps business houses get regulatory clearances.

This applies to SMEs setting up new ventures too. From raising money to securing licences, everything is a challenge and takes too much time. Unless there is a single-window system to facilitate procedures, entrepreneurs will not be encouraged to take risks and set up new enterprises. This, in turn, will compromise employment generation.

SMEs Need Clarity

There is also confusion in terms of the direct tax code, retrospective tax, tax treaty and SEZ. Moreover, these taxes are also too high. For example, service tax and TDS are 10 per cent and other taxes are 7 per cent.

There are also a few laws which make no sense that were introduced last year. For instance, if you raise an invoice, you need to deposit service tax on the 7th of every month, whether payment is collected or not. How illogical is that!

Greater Transparency

Every year, the Comptroller and Auditor General (CAG) releases various reports which expose flaws in government functioning. I wish the CAG would provide the government direction in utilising tax-payers' money. There is a need for more transparency and accountability in the way money collected through taxes is utilised by the government, including the Finance Ministry.

Gorakh Tiwari is Director, Athena Executive Search and Consulting, a talent-management firm. Tiwari has domain knowledge in the areas of finance, energy, infrastructure, IT and telecom.

- As told to Nikita Peer

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