Coffee baron's death fuels India Inc anger over government crackdown on
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[August 01, 2019] By
Aftab Ahmed and Aditya Kalra
NEW DELHI (Reuters) - The apparent suicide
of India's coffee baron V.G. Siddhartha, under investigation by tax
authorities, has inflamed anger toward the government among business
leaders who feel it is going too far in its crackdown on fraud and tax
Drastic measures taken by Prime Minister Narendra Modi's administration
include stringent action to enforce tax compliance, probes into bank
lending practices and threatening auditors with five-year bans for
alleged lapses in their work.
In particular the push by tax collectors has been labeled 'tax
terrorism' by T.V. Mohandas Pai, a former director of Indian IT giant
Infosys Ltd <INFY.NS>, even before the Coffee Day Enterprises Ltd <CODE.NS>
founder disappeared and his body was later found floating in a river in
southern India on Wednesday.
In a letter circulating on social media since Tuesday and purportedly
written by Siddhartha to the firm's board and employees, he said he
"gave up", blaming tax authorities for "harassment" and decisions that
caused a liquidity crunch as well as an unnamed private equity partner
for pressuring him into a share buyback.
The letter's authenticity has not been verified and much remains unclear
about his financial situation and apparent suicide. But the company's
board said it is taking the letter's content seriously and will
The prime minister's office did not respond to requests for comment.
India's income tax department, part of the finance ministry, has said it
acted as per the law in its investigation of Siddhartha and the coffee
chain, and its probe was based on credible evidence of transactions done
in a concealed manner.
Former government officials, industry executives and their advisors,
including lawyers, told Reuters that investigations conducted by Indian
agencies and tax inspectors had often resulted in harassment for
Kiran Mazumdar-Shaw, managing director of biotech firm Biocon Ltd <BION.NS>,
said she knew many industrialists who have been called in by Indian
enforcement agencies but were made to wait for long periods before
questioning began and subjected to "insulting kind of treatment."
"People are made to wait for 24 hours, 12 hours, 16 hours. This is not
some kind of inquisition. It cannot be treated like an inquisition," she
said. "Today every business person is made out to be as if there is
something very crooked about them."
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The logo of Cafe Coffee Day is pictured at one of its outlets in
Kolkata, India, July 31, 2019. REUTERS/Rupak De Chowdhuri
PRESSURE TO COLLECT
Since Modi came to power in 2014, he has made fighting fraud and tax evasion a
top goal, saying he wanted to break previous cosy ties between policymakers and
His administration has targeted banks and heavily indebted businesses and
tracked down rich fugitives hiding out in other countries - popular policies
that helped him win a second-term in a landslide election victory in May.
While many government officials and business leaders agree that regulations need
to be more strictly enforced, they also say the government has been overzealous,
making business leaders too fearful to invest and endangering the health of the
In particular, they are concerned that enforcement agencies increasingly go
after loan defaulters without differentiating between genuine business failures
and corrupt practices.
"Any enforcement agency first looks at you as a crook," said J.N. Gupta, a
former executive director at India's capital markets regulator, adding that the
loss of Siddhartha's life was a very sad moment but one that was giving India an
opportunity to find out what had gone wrong with the system.
"We have a very thin line between duty and harassment. The enforcement agencies
fail to realize that sometimes their zeal could be seen as harassment."
Tax collectors are also under pressure, government sources familiar with the
matter have said, declining to be identified as they were not authorized to
speak on the matter.
With economic growth at a five-year low and keen to fund more public spending,
the government has set an income tax target of 13.35 trillion rupees ($193
billion) for this fiscal year, some 15% higher than last year.
The general distrust of businesses is very high in the bureaucracy, said
Pratibha Jain, a partner at law firm Nishith Desai Associates which advises
corporate clients on tax and investigation matters.
"Tax authorities are keeping focus only on corporations and individuals to meet
their revenue base, rather than looking at it in a fair manner which requires
widening the tax base to get tax evaders to pay up," she said.
(Reporting by Aftab Ahmed and Aditya Kalra; Editing by Martin Howell and Edwina
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