I was talking to a few lawyer friends of mine yesterday night. They told me how the government is beginning to tax “below market price” share transfers. There is a good intention behind this policy. As it so turns out, the bleeding edge of corruption is not suitcases full of cash. Instead politicians — Andhra ones are particularly ‘entrepreneurial’ here — are asking for stock options in companies. Why get a bribe when you can own the damn company?
Unfortunately, this govt policy is hurting genuine investment. Why would Sequoia invest in a startup if it cannot get stock for worries that the options will be taxed? In other words, the govt is trying to solve an enforcement problem through policy. What we need is for the CBI or other investigating agencies to scrutinize stock transfers, to prove that so and so politician wasn’t bringing any value to a company in return for stock options — no IP, no investment, no value addition except for the political connection itself. Transactions in such situations should be tracked and pursued as criminal cases.
Unfortunately, our investigating agencies are simply not capable of conducting such investigations. Forget the political interference that prevents the CBI or even worse, the local police from prosecuting a case; they don’t have the understanding of evidence gathering, technical analyses and legal representation that go into a prosecution. Look at what Preet Bharara has done in the Raj Rajratnam case. That’s what we need in India.
Starting with the IAS and IPS, we need a much more professional governance cadre. To my IAS and IPS friends: it is not enough to have BTech degrees from the IIT’s. There is a genuine expertise to public administration. Data driven policy making, analytic techniques, evidence gathering along with fairness, equity and justice; these are skills and values that will both make the services more professional and bring more legitimacy to your work and make the work itself more challenging and enjoyable. I hope we can do something to make the country better governed.