Dont Kill the Hen of MSMEs

We all had listened the story of killing of hen to get all golden eggs in one day. There were no golden eggs and hen was also killed. When we see government going so hard after businesess with so much compliance and late fees and penalties, one can draw parallels to story of hen. MSMEs will be killed and government will not get any golden eggs.

Even businessman himself spends lot of time and resources on compliance of tax regulations. In India we have seen businessman petrified of Taxes and Compliances. There are cases of businessman closing down the business due to fear of taxes.

Talk to any chartered accountant nowadays in India and you will find him talking only about tax filings, due dates, returns and reports. He is always busy in some kind of tax compliance. So much so that it is almost forgotten that Chartered Accountants have other roles to play in business other than complying with tax regulations. ICAI should make a nationwide survey of amount of time Chartered Accountants spend in just tax compliance. We are sure the results of this survey will be eye opening, shocking and thought provoking.

If tax burden and compliances are reduced, businessman and his Chartered Accountant together can grow business to great extent, which in turn will definitely contribute towards taxes.

Here two things can be done, First thing is to reduce the tax complexity. Lot of resources will be saved. Chartered Accountants will be free to contribute in other areas like financial and working capital Management, business restructuring, pricing costing and budgeting, advising businessman on business growth.

Once the complexity is reduced, tax administration structure can be minimised. Right now lot of time is wasted in visiting government departments, assessments and paper submissions. This all can be avoided. That will reduce tax administration cost. Corruption will come down.

Second is to reduce tax rates. If tax rates are lower businessman will not be against payment of taxes. Level of tax payments will go up manifold. More and more people will want to come under the tax net.

Take recent example of Maharashtra government where rate of stamp duty was reduced from 6% to 2% and actual collection went up.

To conclude, government should feed the hen of MSME, support it and help it grow and then it will automatically give golden eggs of lot of tax revenues to government.

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