Just scrap the SEZ scheme already !
I have said many times in the past that the tax holidays for IT services companies must end (see links at end of post). Must have ended 10 years ago. They are sitting on mountains of cash with nowhere to invest. Their core business of outsourcing is dependent on billing human resources. Apart from training and facilities management (buildings, gensets, travel / visa ) – there is really nowhere they can put the cash. If you think our IT companies are much more and need cash investments, this site might be more suitable for you.
This article says that the tax holiday might have made it much easier for Satyam to cook its books.
In some ways, the tax-free status of IT companies may have allowed the Satyam promoter to cook up numbers in the company balance sheet. Had the company been paying tax at the regular rate, inflating revenues and profits would have been that much more difficult, as tax payments mean real cash outgo. Indeed, when corporate accounts come under a cloud, investors should look at tax payments and dividends, both of which entail cash outflow from the company, as a source of comfort about the sanctity of accounts. The IT sector was given a 10-year tax holiday under section 10A & 10B. The benefit was to end in March 2009, but the government has extended it by one year.
Source : ET
Cash on books of companies requiring little investment invites corruption.
The SEZ scheme must be scrapped immediately. Whether it is Murthy, Nilekani, Premji, Raju or thousands of others. They must made to pay fair tax . Kicking and screaming.
Alternately, these stalwarts need to come out and clearly quantify how their growth (not profit) will be impacted if they paid normal corporate income tax. I am sure we can use the cash for the welfare of the poor and oppressed classes. No?
Also read previous posts on the grand SEZ scam :Nilekani Imagining India, SEZs need to go in Goa, SEZ Chat, PIO University in an SEZ ? , IT SEZ – Everyone wants a holiday, Minimum Alternate Tax issue, Everything is wrong with us (maximum size cap on SEZ), Panel extends IT holiday to 2019 , and more