In an article in a recent issue of Red Herring, a magazine devoted to business and technology, Jennifer Schenker counted the number and size of venture capital deals and used this as a measure of innovation. As one might expect from North American location of most venture capital firms, Ms. Schenker found that in 2006 Venture capitalists invested approximately € 9,104,000,000 in 1367 separate deals in California alone.
VC investments in the UK totaled €1,784,000,000 in 515 deals and in India totalled €682,000,000 in 71 deals.
Now let’s consider the meaning of the phrase red herring: A diversion or distraction from a central point or objective. The issue of Red Herring referred to above also carried a story about a proposal by India’s government for a new retroactive 35% tax on issued but unexercised stock options.
Stock options of course are a favored form of compensation for revenue poor startup companies, and one can only go as far as to speculate what the eff ect of such a tax will be on innovation and investment in India.
Even with Finance Minister P. Chidambaram’s recent announcement that the tax will be levied on the value of the shares at the date of vesting rather than on the date of issuance, this tax will very likely have deleterious consequences for innovation in India and its ranking in the Global Innovation Index.
Is this tax India’s red herring, its distraction from innovation? Is this a destructive tax that discourages creation & all that might have been a motivator?
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2007
An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative
