high taxes

by Guruprasad

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We always hear about how much talented Indians are. 33% of Microsoft employees are Indians, Indian businessmen controlled 25% of the world economy at some point of time.. Some of the top entrepreneurs around the world are Indians.
But why are most of those Indians not in India but in US/UK? Why did we have such a severe brain drain in 1970s and 80s?
One common answer we get is that India does not have the right opportunities for our specialization. Maybe true for technical PhD holders. But what about entrepreneurs? They had a market of 0.7 billion ppl, something that nobody would like to ignore.

It is easy to say that they were greedy, did not care for our country and fled to the US for greener pastures.

But have we ever given more thought on why they did that?

This snapshot of the 1974 budget might give us some hints. During Indira Gandhi’s era in 1970s, income tax was at an all time high. It seems the top slab had a tax of 97.75% !!
If you are an entrepreneur and want to set up a business (obviously you want to make lots of money so that you can invest it back for R&D, expansion plans etc), would you want to do business in such an economic condition? After a certain slab, for every profit of 100rs you make, are you ready to part away 98 rs to govt and keep only 2 rs for yourself?

And not to forget the sheer amount of running/lobbying you had to do to get hundreds of approvals to start a business in the license raj era.

Isnt it much simpler to hire a taxi to the airport and get out of the country?

Our talented brains & entrepreneurs did not leave our country, leading to brain drain. Our policies pushed them out.. It drained them out!!

Snaphot taken from Budget report:

http://www.saraltaxoffice.com/resources/budget-speech/budget-speech-1974-1975.pdf (page 9)

http://books.google.co.in/books?id=Qydb7X45MzYC&printsec=frontcover#v=onepage&q&f=false (page 96)

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