Most of our IT software-services companies enjoy tax holidays. While this has been a good incentive that encouraged many such companies to proliferate in India, I think its time to take relook at this. Why should certain big companies, which have gone public, have a brand name, and are making colossal profits, be enjoying this tax holiday? Yes, I understand why it came into existence in the first place. We were not on a level-playing field, we needed support, encouragement to compete with global giants. But some of these tier-1 software-services companies have achieved the status of being able to compete with these global giants. Do they still need these tax holidays?
I propose that once a certain IT company reaches a revenue-mark, say $1B, combined with certain net profit-mark, say 20%, it should start paying taxes. Come to think of it, the government could use these funds in innovative ways. It could use some of these funds to create more technology oriented and product-oriented companies, like giving loans at cheaper rates, or investing in those companies on part-loan, part-equity model, creating zones and lab setups for such tech startups, or reimbursing money for patenting, or decreaing employee taxes to tech-startup in the first three years before it start making revenues, etc.
Hmm… we need bold, aggressive and innovative methods to go that next stage!