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Running Businesses...Where Does The Shoe Pinch??

Tax laws need coherent simplification & huge reconciliation, because each day's delay in getting out of cobwebs, adds to interest & penalty burden.

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World Bank brings out a yearly report on DOING BUSINESS, for the last 17 years. Out of 190 countries in the world, only 115 are tracked for ease of doing business.
 
In New Zealand,  you can start your business the same day .....no wonder it tops the World Bank list for the last four years, closely followed by Singapore & Hongkong. Other high ranking countries in the list are Denmark, South Korea, USA, Georgia, UK, Norway & Sweden.
 
Only 2 African countries reach the list of 115 countries...Rwanda & Mauritius. In fact, Latin America is the worst continent, with no country under reckoning of the World Bank for this purpose.
 
What factors are considered by the World
Bank to assess where the shoe pinches?. A dozen parameters are evaluated, of which the most important ones are employing workers, getting construction permits, accessing power, obtaining credit, paying taxes& enforcing contracts. In the Indian context, 3  factors more relevant are registering property, trading across borders & resolving insolvency.
 
Over the years, which countries have taken this report seriously & made amends?? Visual Capitalist observes that

Saudi Arabia at 62nd position has jumped several notches. Bahrain has also catapulted itself well to the  43rd rank. China has inclined progressively &  reached the 31st place. India too is improving every year, & scaled to 63rd slot recently, still 13 short of our target.
 
Niti Aayog monitors India's performance regularly & exhorts the State Governments to reform their systems. Enormous progress has been made by  Delhi & Mumbai municipalities in making construction permits online, from a totally porous corrupt system of the past. On line tax payments have seen large reforms enabling India to jump up every year. Many Stare governments have started single-window clearances to expedite starting of businesses.
 
Then where & why does the shoe pinch? Being in the government for 35 years, and now on the other side as a consultant, I clearly find 5 obstructions hindering our progress. First, the income tax department is the biggest offender .....if the number of tax appeals alone are an indication,  the figure runs into several lakhs in involving small & medium businesses. Tax rates  & tax collection methods, require dropping of undue complexities. Tax staff needs massive doses of up-gradation in capacity building in tune with digital processing. Tax laws need coherent simplification  & huge reconciliation, because each day's delay in getting out of cobwebs, adds to interest & penalty burden.

Secondly, a plethora of laws confuse the wisest. On the Board of a sugar-producing company, I found they are cornered by more than 50 laws in UP, some dating back to the British period. Law ministry needs serious feedback from Industry to trash most of its old archaic laws.
 
The third big bottleneck is the court & the engulfment of cases there for eternity. Each high court judge needs to spend one day a fortnight, on inspecting lower courts, rewarding good judges & punishing the black sheep. Carrot & stick alone can dilute the coagulated chaos here.
 
Getting easy credit & registering property without glitches & harassment ,are 2 other factors, keeping India away from its target .Let Niti Aayog concentrate on these 5 issues & I'm sure we will reach the target of top 50 .Otherwise the danger of sliding back looms large.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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J.K. Dadoo

The author is a retired IAS officer

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