MUMBAI: An ultra-low taxation alternative needs to be given to local companies to help the financial capital compete better with cities like Dubai and Singapore, Jay Kotak, son of veteran banker Uday Kotak, said on Wednesday.
The 31-year-old Kotak, who works as an associate vice president at Kotak Mahindra Bank, said attracting capital is very important for the financial capital's future and suggested carving out a small area within the city which will have lower taxation rates.
India's only International Financial Services Centre is at Gandhinagar in Gujarat, offering a slew of flexibilities in operations for companies, which help them to compete better at the world stage.
However, a bulk of the financial sector entities, including head offices of lenders, regulators, insurers and investment bankers, have been located in Mumbai for many decades.
The state government wishes to expand on the same.
"We need to figure out how to better compete with regulatory regimes like Singapore and Dubai which are the primary competitors or threat to Mumbai's ability to grow," Kotak said while speaking at the 'Colaba Conversations' event.
He said ease of business and taxation are the areas which need to be focused on and acknowledged that the latter is a "complicated" aspect given the single tax code for the entire country.
"We do not have the luxury of Singapore or Dubai kind of laissez faire ultra-low tax route.
But we need to think of some via media by which maybe we isolate out a small zone in Mumbai or do something or the other to compete with these jurisdictions on taxation," Kotak, an alumnus of Harvard Business School, said.
Before the city works on regulatory issues, it needs liberalisation in various areas which will help attract the best talent to its shores, he said, stressing that there is a need to make people want to move in for aspects like nightlife, restaurants, schools and museums.
The state government will also have to seek the support of the Union Ministry of Finance as taxation involves rules framed at the Centre, he said.
Once all the aspects on the liberalisation front -- taxation and talent attraction initiatives -- are in place, the city should move on to "tighter regulation", he added.
This should include making it harder for people to conduct financial activities in India from outside the country, he said, pointing that a slew of hedge funds invest into India from Singapore or other foreign investors come in through the Mauritius route.
"If we believe that we have the domestic infrastructure to handle this kind of demand, there is no reason why we should allow this.
There is no reason why a company based in India with 95 per cent of its business in India should be allowed to primarily list in Singapore or London when Mumbai has the requisite infrastructure," Kotak argued.
Kotak, who was born and raised in the financial capital, conceded that such a measure will be a heavy-handed tool and regulation is a double-edged sword.
He further said there has already been a significant amount of progress during his lifetime and the financial capital is a radically different city now.
Speaking at the same event, managing director and chief executive of Edelweiss Asset Management Company, Radhika Gupta said the city needs to focus more on creating the right infrastructure and turn itself into a serious tourism destination.