Satyam fiasco has brought out a big question on how to check the business models and financial reporting of the Information Technology companies. Most of the technology companies in India have been enjoying tax exemptions over a decade and have also got exemption for a few years more.
As these companies are not taxed, their financial reporting can easily be fudged by anyone. Any IT company, which does not pay any tax on its revenues, can overstate it to mind boggling proportion without even being worried about the consequences. A simple and symbolic tax could be answer to all such malicious activity as ones these companies would be forced to pay tax on revenue and disclose their financial statement it would become tough for companies to continuously over state their revenues for more than a year.
There is also need to check on the business models of the companies, most of them are under tax exemptions and are now pulling themselves under SEZ status, it has become difficult to keep a tab on their functioning. Government needs to bring in regulation for disclosure of forex revenue generated from such units and the banks where they are parked. This measure will effectively keep a check on the financial activities of such IT firms and will also discourage many fly-by-night operators from posing as Information Technology firms to manipulate their IT SEZ status for retail purposes.
As these companies are not taxed, their financial reporting can easily be fudged by anyone. Any IT company, which does not pay any tax on its revenues, can overstate it to mind boggling proportion without even being worried about the consequences. A simple and symbolic tax could be answer to all such malicious activity as ones these companies would be forced to pay tax on revenue and disclose their financial statement it would become tough for companies to continuously over state their revenues for more than a year.
There is also need to check on the business models of the companies, most of them are under tax exemptions and are now pulling themselves under SEZ status, it has become difficult to keep a tab on their functioning. Government needs to bring in regulation for disclosure of forex revenue generated from such units and the banks where they are parked. This measure will effectively keep a check on the financial activities of such IT firms and will also discourage many fly-by-night operators from posing as Information Technology firms to manipulate their IT SEZ status for retail purposes.
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