A month or two back, outlook carried this cover story that Bangalore is dying, unable to take the weight of the sudden influx in population due to IT. that it is losing it’s culture. and all such. it was a fairly controversial story and created a lot of “group discussion”.
I support the story. I believe that IT has spoilt bangalore. ruined it beyond recognition. there has been simply too much influx of outsiders, and the city hasn’t been able to bear it. and despite the pathetic situation of the city now, people continue to set up companies here and the problem jsut gets worse. There’s a network effect you see – bangalore already has a large number of IT coolies, and it’s a fertile ground to poach for anyone else who wants to set up shop here. it’s a kinda perpetual motion machine.
A couple of years back there was this controversy involving deve gowda and narayana murthy, among others. the IT companies alleged that the state isn’t doing enough for them. that it isn’t building good enough infrastructure and it’s not a good thing. the politicians responded by saying that the companies aren’t doing anything for the local community and that they should help pitch in to build new infrastructure, etc. that they aren’t doing enough in terms of corporate social responsibility.
I’m firmly of the opinion that the greatest social service that businesses can do is to do good business. and pay a part of the profits to the government in the form of taxes. the best that the government can do is to allow businesses to do business. AND COLLECT TAXES. and then use the proceeds of those taxes to build the necessary infrastructure, etc. the problem with IT currently is that the government isn’t collecting taxes. that they’re getting away by paying some abysmal minimal alternate tax.
also there needs to be some kind of improvement in the tax mechanism. let’s look at it from the point of view that companies pay taxes in order to compensate for all the negative side effects that they cause – for which the government needs to clean up and hence deserves taxes. is there a way in which tax revenues can be distributed in order to reflect this?
or do we try to collect tax at each externality? say there is one income tax which covers general public goods such as policing, defense, foreign policy expenses and all such. can we collect the rest of the taxes where it hurts? For example – a big problem that the IT guys have created in Bangalore is in terms of traffic. Is there a way in which we can effectively tax these guys for all the traffic trouble that they cause? in this specific case, of course, this can be collected in the form of a toll. and the tolls thus collected should go into rectifying this particular problem – such as widening roads or building a metro etc.
right now the central government, for whatever reason, refuses to tax these IT guys. and is even creating new loopholes for them – for example there is an SEZ on outer ring road (cessna business park or something) which is no bigger than ITPL! they were building a software park, and then realized that the STPI thing is expiring next year and this is a new loophole. and voila!
can the local government do something in order to compensate for this? so that the local resources that are being drawn out can be adequately compensated? and can this be done in a manner without loopholes, and wtih a good set of incentives? and without too much side effect to others?
ok that was a random collection of thoughts in this topic. hopefully sometime i’ll sit down and make a better post out of this. for now only one thing – i just hope Chidu doesn’t extend the STPI scheme beyond 2009.
PS: i don’t understand this funda of giving tax breaks for exporters. aren’t we effectively subsidizing foreigners that way?