To loser India, with love from Philippines

To

The Honourable Finance Minister of India.

Dear Sir:

I wish to introduce myself as the Finance Minister of the Philippines.

I am truly grateful for all the actions that your excellent Ministry has been undertaking these past few years which have helped the BPO industry in the Philippines a great deal. You may  be aware that the Philippines BPO industry has been growing much faster than its Indian counterpart and is now all set to overtake the Indian industry which till a decade ago was viewed by all of us with wonderment, awe and envy. We never dreamed that our country could  be in the same league as India.

But then we were earlier not well-informed about your  Income Tax Department,  the frequent and arbitrary changes in rules that emanate from this department and the vicious harassment of  Indian I.T. and BPO industries which over the last several years has become a concerted strategy of this great department. We in the Philippines count the Indian Income Tax authorities among our best friends.

We request you to give us the names of the individuals in this worthy department who have been behind this wonderful strategy of weakening this labour-intensive Indian industry and indirectly helping the growth of our own.

We would like to confer special Magsaysay Awards to these individuals, refer to them as “ Friends of the Philippines” and invite them to have a holiday in our country. The BPO companies in the Philippines have generously promised to foot the entire bill of their benefactors.

The Indian Income Tax Authorities are particularly targeting “Captive BPO” companies by asking them to re-compute their taxable profits based on arbitrary and changing transfer pricing guidelines without adequate safe harbor provisions which are commonplace in most countries. We have decided to do exactly the opposite.

 We are reasonable in our tax demands, simple and transparent in our transfer pricing rules and generous in our tax holidays. This has resulted in many Captives stopping the growth of their Indian BPO outfits and accelerating the growth of their units in the Philippines.

All the employees of these units in my country wish to express their gratitude to you, your government and  your ministry . Without the capricious behaviour of the Indian government, most of them would not have jobs.

I am now told that your officials are raising tax demands on captive units of global companies using their global profits as the basis. What a wonderful idea! I have no doubt that this one decision alone would cause several of these companies not only to stop growing their Indian subsidiaries, but actually start winding them down. Nothing could be better news for the Philippines. I have instructed my officials to come up with other distinctly business-unfriendly regulatory ideas.

(This article first appeared in The Indian Express) Click here to read the complete story

The writer, Jaithirth Rao, is a Mumbai-based entrepreneur