'Expect Budget to have progressive income tax rates'

'Expect Budget to have progressive income tax rates'

By Malini Agarwal, 

This year I suspect the overarching sentiment from all quarters will be for the government to take steps to immediately stimulate the economy and reverse the current morass that hangs over the industry. 

We often think of large, independent unicorn stories when we think of startups, but the reality is many small and medium-sized enterprises operate downstream as suppliers to larger corporates. Therefore, I’d like to see policies that reinvigorate widespread consumer demand and spending, which in turn trickles down to the startup economy. 

 The most anticipated proposal would be the introduction of new progressive income tax rates that puts money back into the wallets of everyday consumers, following the recently implemented corporate tax cuts that have yet to bear fruit. Without confidence in sustained, robust demand, corporations are unlikely to reinvest their tax savings and therefore the two must go hand-in-hand for the benefits to be felt. 

 Aside from the demand for their services, startups need capital to build their enterprises. While VC activity has certainly grown in India, broader access to funds continues tightening as banks and NBFCs become more risk-averse. Many promising startups are unable to get off the ground due to simple working capital constraints. The government should introduce more financial sector safety nets to mitigate the crippling fear of bad loans, which would help loosen the purse strings. 

 Lastly, the tax and regulatory environment need further reforms targeted specifically at startups. We have certainly seen some progress, perhaps most visibly on the angel tax issue. And yet too much of an entrepreneur’s time and focus is still spent ensuring they do not run afoul of regulatory compliances, which can be obscure and subject to frequent change. Entrepreneurs have enough to worry about building and scaling a business, and doubly-so in a softer economic climate.  Therefore, any steps that would streamline compliances would free up a significant amount of entrepreneurial drive, talent, and energy which is exactly what we need right now. 

 

(The writer is Founder and Creative Director MissMalini Entertainment)