According to CEO Insights, India aims to surpass China in investment, but significant barriers stand in the way of realizing this potential. High tax burdens, inadequate intellectual property protections, and restrictive regulations make it difficult for companies to successfully enter and operate in the Indian market. Well-known firms including Tesla, Nokia, Parimatch, Foxconn Group, and Wistron Group acknowledge these challenges.
Tax Challenges for Foreign Businesses
India has the potential to rival China as an investment hub and grow into a major Asian economic powerhouse comparable to the United States. However, companies like Parimatch are forced to halt investments or exit due to the heavy tax load imposed on foreign firms. Removing these barriers could enable India to become an attractive international business destination with a $5 trillion economy by 2027.
Unpredictable and Complex Tax Environment
Both domestic and foreign investors face a hostile business climate, with tax authorities imposing excessive levies on companies such as Tesla and Nokia. Research by the University of Paderborn and the World Bank ranks India 53rd out of 100 for tax code complexity and 58th for overall tax system complexity.
Heavy Tax Burden on Foreign Enterprises
The global minimum corporate tax rate for multinationals with annual revenues above €750 million is 15%, yet India applies a 30% corporate tax rate on foreign businesses, considerably above the global average of 23%. Streamlining taxation through electronic solutions could accelerate processes and attract more capital, a prospect that interests companies like Parimatch.
Weak Intellectual Property Protection
Counterfeiting remains a significant issue in India. Despite having no official office in the country, Parimatch is committed to investing, paying taxes, and supporting the gaming sector’s development. However, lack of adequate intellectual property safeguards impedes these efforts.
Exit of Major Corporations
Ambiguous tax policies and insufficient legal protections have driven many companies to relocate operations from India to other emerging markets. Foxconn Group and Wistron Group have exited, while Tesla has delayed its Indian operations due to the high tax burden.
Vietnam Attracts Diverted Indian Investment
Despite India’s pressing need for capital, foreign direct investment inflows are falling short of their potential, with much of the money instead flowing to Vietnam. Nonetheless, domestic and foreign firms, including Parimatch, remain eager to invest millions in India if the government fosters a more favorable environment for international capital.