Venture Fund Tax: Goverment Plays an Inefficient Big Daddy

Much has been said about why taxing VC funds is a bad idea. It inadvertently can choke-off risk capital and only puts domestic funds at disadvantage as foreign funds can always operate out of Mauritius to avoid govt domestic dictates.

What has not attracted press attention is the fact that govt is playing a macro-economic spoilsport by assuming it knows the best when it comes to efficient capital allocation.

By exempting nine sectors -- biotech, IT-ITES, seed research, nano tech, chemical research, dairy industry, poultry, bio fuels & hotel cum convention centers -- from tax net, govt is forcing capital to stay away from other sectors.

First of all, when it comes to new venture funding, I find the idea of sector specification itself as naive. Revolutionary ventures often end up creating new sectors. Secondly, specifying a sub segment such as bio fuels against broad sector such as alternative fuels amazes me. What about solar cells, what about water desalination and what about revolutions such as micro finance Mr. Finance Minister?

Govt must stay away from playing a short sighted & high headed big daddy who forces his intellectually capable super-kid to take up sports and turn into a mediocre sportsman, when the kid could have well become an Einstein.