VG Siddhartha’s case exposes what Indian businessmen struggle with in current stressful environment

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Updated: July 30, 2019 5:24:12 PM

The shocking disappearance of Cafe Coffee Day founder VG Siddhartha, allegedly after facing harassment from tax authorities, has brought to the fore the stressful environment with which businessmen have to deal in India.

Siddhartha was headed for Sakaleshpur, Karnataka, but on the way he had asked his driver to go towards Mangaluru, according to the police.

The shocking disappearance of Cafe Coffee Day founder VG Siddhartha, allegedly after facing harassment from tax authorities, has brought to the fore the stressful environment, replete with tax terrorism, liquidity crunch and debt overload with which businessmen have to deal in India. Industry experts point out that present day businessmen are subject to various issues in a heavily stressful business environment. In a letter admitting to wrong business decisions and concealing information, VG Siddhartha said that he faced harassment from previous DG of income tax pertaining to blocking the Mindtree deal. VG Siddhartha is the son-in-law of former CM of Karnataka SM Krishna.

Highlighting the various issues faced by entrepreneurs, Shriram Subramanian, MD of InGovern, said that corruption is rampant is the country. “Look at the harassment by various government departments — IT (income tax), ESI, PF, PT, GST — not to mention the multiple filings and scrutinies that make it onerous on startups and entrepreneurs. Corruption is endemic in everything, including getting a company registration,” Shriram Subramanian said to Financial Express Online. “The ease of doing business is just for numbers and the international rankings,” Subramanian added.

Also read: Cafe Coffee Day shares plunge to record low after VG Siddhartha goes missing; should you buy or sell stock?

Entrepreneurs also face difficulty in day-to-day operational issues even before their business can begin, such as getting their office registered. Getting an industrial land allotted takes up to three years after spending a lot of money and energy, Sriram Subramanian said. “Once a company is seen to be successful, politicians and bureaucrats want their pound of flesh. Unless red tape in bureaucracy is reduced, there will not be any ease of doing business,” he added.

Former Infosys Chief Financial Officer V Balakrishnan noted that in the recent times, tax authorities have become highly confrontational. “He built a great business, equivalent to Starbucks of India. The contents of the letter are very disturbing. He’s talking about tax terrorism, pressure in the business due to huge debt etc. The tax authorities have become much more confrontational. Entrepreneurs are facing increased tax terrorism from the authorities,” V Balakrishnan said in an interview to ET Now. Taking stock of the current environment,  Balakrishnan noted that the sad reality is India is seeing a huge economic slowdown, as seen in the Q1 results of all companies. The liquidity situation is very bad, filled with NPA’s and banks struggling to lend, he said.

Another industry veteran TV Mohandas Pai also expressed deep sadness about the alleged harassment faced by VG Siddhartha. He urged the NDA government to order an enquiry into the tax issue, noting that tax terrorism is still rampant in the country. In an interview to CNBC TV18, TV Mohandas Pai, former director at Infosys, said that the issue should serve as a wake up call, and the industry at large should not demonise entrepreneurs for non-payment of interest or capital due to business reasons. “Not everybody who defaults in a crook. Investigations should go on, but do not damage anybody’s reputation or cast aspersions on their character. There are a lot of lessons, and we must learn from them,” TV Mohandas Pai said.

Meanwhile, Coffee Day has said that it convened an emergency meeting following the disappearance of its founder. “The Board is confident that the professional management of the Company and each of the entities in the Coffee Day Group and their respective leadership team, will ensure continuity of all business operations consistent with past behaviour,” said the company in a statement to the exchanges.

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