Startups and entrepreneursare at War with the Government and no one knows for sure where the buck will stop in the end. There are lots of reasons for such tussles between the two. According to different sources it is revealed that it is the tax liability factor that is perhaps the most significant cause of all.
It is seen that most of the startup players push their legitimate and genuine tax liabilities under the semblance of angel tax or some other pretext. This is highly detrimental not only for the economy of the country but also affects the developmental work and intention of the government on the whole. This has a serious and drastic effect on the market especially when the government is trying to create the most startupfriendly ecosystem.
This in turn affects the functioning as well as the existence of the genuine startups adding on to their woes of arranging for funds which is as it is very difficult for them from any traditional sources such as commercial banks or even from other sources such as Liberty Lending.
The only way to resolve the issue is to have a common agenda between the government and the startups. This is the only way which all matured ecosystems of the world has survived and rectified such issues. Add to that there must be a balance and best use of the technological advancements available to create the best startups so that the issues with the economy and the small entrepreneurs can be addressed in a large scale for the beneficial purpose of the entire nation on the whole.
The unique common agenda
The unique common agenda of the startups and the government is unquestionably unparalleled. There is no scope to raise any question regarding the intent of either of the two, startups or the government and if anyone does it is up to malice and deserves to be summarily dismissed.
However, Rome was not built in a day. It took time and so will this issue to be rectified. The government will have to reiterate their stance and repeat what it wants to attain the most ambitious goal of helping the startups and entrepreneurs grow quickly.
- There are several programs designed by the government that are specifically designed as the pet projects to revive the growth of startups.You will see now that every governmentled summit or conference will focus the growth of startupsin different business sectors. Governments are of the view that the startups will create more jobsand thereby reduce the ever rising pressure on the government to create job opportunities.
- In this attempt you will see that governments of different countries have mulled tweaking their policies and regulations that are typically flagged by the industry groups, startups associations, industry veterans and even the startup entrepreneurs. All the policies are being rectified now with the only intent to take the growth of the startupsahead.
The problem however lies elsewhere. Given the fast growing economy of the world, several governments have opened doors to Foreign Direct Investment or FDI to a large extent in about all the sectors.
- Governments are now getting more money from overseas and almost all big investment groups and venture capitalists, evangelist and angel investors are now willing to invest and earn a penny from this burgeoning consumption.
- However, this growing interest by the investors of different kinds and forms has opened the window of opportunity for several business startups. Entrepreneurs who are looking for a start and to scale have now found an easy way out to go global. They are now more focused on innovating new ways to improve their current setups.
However, such a given scenario is not actually good for the free countries that face the threat of being treated just like a dumping ground for more capital. There is a lot of ambiguity in this regard. It is believed that for these free countries,such excessive flow of capital will raise a lot of concern and the onus will undoubtedly fall on the government as such to protect the interests and rights of the startups but at the same time ensure that their scopes and opportunities are kept intact.
Devil does wear a Prada
It is here that the devil steps in and as usual wearing a Prada. It is therefore necessary for the government to make sure that there are no malpractices by the investors so that no one ends up taking away the big opportunities of the governmentsto earn a handsome amount in the form of taxes.
- Several governments of different countries in the world have put on Angel Tax in place. This is a specific tax that is simple. This tax refers to the income tax that is payable on the capital raised by any unlisted company through issue of shareswhere the price of the sharesis specifically seen to be in excess of the prevailing fair market value of the similar shares that are sold.
- There are a few clauses worth noticing in the Angel Tax though these clauses may vary from one state to another and even form one country to the other. It is believed that these clauses have not worked well and as desired by the government especially when the investors’ community is concerned.
- It is also seen that there is an abundant scope of dialogue regarding how an economy could not survive and sustain a domestic ecosystem for the startups when especially the domestic pools of capital are marked at a disadvantage as compared to the foreign capital pools.
As per the suggestions of experts, the countries and governments that are still found struggling to establish a workable ecosystem for the business startups against its own populace they need to change their policy especially in the taxes and returns.
They say that taxes from investing in startups should be made taxes on capital receipts as income which will be more fruitful for the government to provide a more sustainable and workable business environment.