An Open Letter to the Finance Minister of India From anEntrepreneur Prior to Budget 2012

Dear Shri Pranabh Mukherjee,

Greetings!

I am glad to be writing to you and it would be a privilege if you were to read this, preferably before you decide on 2012 budget.  I am the Founder of Moolya Software Testing Private Limited which I founded in December 2010 through bootstrapping and with my colleague Santhosh Tuppad. In our first year of operations, we scaled our business to an extent where we had a break even in 9 months and started making good enough profits towards the financial year end. We have customers from India, United States and United Kingdom.

While technical strengths and skills have been important for our success, we recognize that an environment being conducive to do good business is very important. I would like to take this opportunity to thank you and ex-ministers in your capacity for the foreign policies and export policies that have permitted us to start and perform good business without restrictions.

I am also sure that it is not just me but there are quite a few entrepreneurs who are successful due to the environment and government policies favoring them. Just that somewhere some government officials require a bribe to do their work doesn't mean we can call the system as bad and forget the brighter side of what the government of the past and present has done to us.

My goal of writing this letter to you is three fold. One – I already accomplished – to thank you for making the environment conducive for business growth. Two and Three – are to put humble requests that can help India scale further heights in economy.

Tax exemptions / discounts for our initial years

If we make a profit of let’s say X lakhs , the tax on it is 0.3 X.  We understand that tax does help the nation to support a lot of activities that include infrastructure, public health, public transport, helping the poor get food, funding new machinery for the army and other important things needed to support a country. We understand why we pay tax and what we get in turn. Our country’s growth could directly be proportional to our business growth and our business growth could be an indication of how the country is developing. We want more good to happen – to our country and to our business.

With that view in mind, I have some humble requests to you and the government.

I think that providing tax exemption for start-ups for the first three years could be largely helpful. Although it appears to be a one-sided proposition, I would like to help in describing that it is not one-sided and is of of mutual value. The first three years is critical for a company’s growth. This is a time that determines the future of the company. With that in mind, here are some pointers:

• We could have hired more people for our organization instead of paying so much tax during our initial years – thereby creating more employment within country – which in turn would help our economy grow.
• We could use that money to buy more equipment we need to attract more customers to our organization – thereby bringing in more foreign money to India – which I am assuming would help our economy grow.
• We could have helped ourselves move to a better infrastructure – thereby expanding our capabilities to get more projects running within our organization – which again I am assuming would help in increased revenues for the company and future potential for more tax liability.

If we were to grow at a rate of 300% for the first three years, the tax we pay at the fourth year could be more than that of combined tax of the three years if we didn’t grow at 300% every year.

If exempting tax completely appears one-sided, we could appreciate discounts or tax payments for the first three years spread over a period of 5 years. Of course, I am aware of tax holidays if we were to sign up for SEZ or a 100% EOU but our business probably doesn’t demand it. Moreover, I am not just speaking for Moolya but for plenty of other start-ups in India.

With the little financial understanding I gained from having been in business, this is what I can think of, to help our country bloom and boom with entrepreneurs creating more job opportunities and making India stronger towards the future. There hasn’t been a new Infosys, a new Wipro, a new Tata or a new Reliance in making over the last 10 years, or at least I am not aware of it. I just hope Moolya could be that. There are plenty of other companies who could do that too. With the increased government support, we could make it possible.

The other humble request, is tax exemptions for donation to social causes

Our company decided to sponsor a child’s education for every new customer we add with an on-going project. We sponsored a child through an NGO, got the invoice and submitted to our auditor. We thought this was exempted for tax and could be counted as expenditure but I was shocked to learn that there is no exemption for supporting social causes as a company. I could do that as an individual and avail exemption on tax but as a company when my capability to do more in helping poor children in India get education, I am denied from the exemption.

There is no doubt that every one of us understand the value of education in India and the support the public needs to bring in to help India do better in education. We are who we are because of our education.  As a company, sponsoring poor children for their education is indirectly helping the government save some cost (a very minute fraction though). We hope the government considers such spending as expenditure by the company. Again, if giving 100% exemption looks to be impossible or one-sided, a 50% would still do a lot of good.

I want to thank you for the time you may have taken to read this and hoping you would consider some of my humble requests before processing the upcoming budget.

We hope to add more customers, bring more revenues to the company, make more profits, pay more tax and help more children who can’t afford education, get education without having to think about poverty. With the government support increasing, I guess we entrepreneurs can help you budget peacefully without having to make you add taxes to daily used commodities like petrol and food products. We are committed to help in building a reputation for the country and the government that runs it.

If a rookie businessman can think these ways, I am sure; you can do a lot better thinking for the improvement of the country. Kindly forgive my ignorance, if any.

Jai Hind!

Sincerely,

On behalf of all entrepreneurs,

Pradeep Soundararajan

Managing Director

Moolya Software Testing Private Limited

Bangalore

8^th March 2012

Image Courtesy: Reuters