The recent decision by the Finance Ministry to levy higher tax on those earning over ₹2 crore a year is coming in the way of attracting global talent to India, say human resource consultants and expat CEOs. According to them, many foreign executives and non-residents Indians are having a rethink about opportunities in India.

“The taxes are currently too high, which, in my opinion, goes against the idea of attracting global talent. This, therefore, has a bearing on the net payroll. This also impacts our ability to correct salaries,” said Puneet Chhatwal, MD and CEO, Indian Hotels Company. Chhatwal himself moved back to the Indian hospitality sector in 2017 after stints in Europe and North America.

In the recent Budget, Finance Minister Nirmala Sitharaman announced that the surcharge on tax would be increased from 15 per cent to 25 per cent for those whose taxable income is more than ₹2 crore and up to ₹5 crore. And for those whose taxable income is more than ₹5 crore, the surcharge has been increased from 15 per cent to 37 per cent.

Take-home takes a hit

According to Prashant Singh, Business Head of HR firm TeamLease, this move has raised several eyebrows in the expat community. “The tax slab has jumped substantially. They (expats) see a major hit on their take-home (compensation) and financial plans, specifically those expats whose origin countries have a lower rate of taxation than India. Then, it’s a dampener for them to pick up the offer.”

Anjali Raghuvanshi, Chief People Officer, Randstad India (an HR consulting firm), said that India is among the top tax collectors across the globe, which could be discouraging for those coming from other countries into mid-level and CXO (chief experience officer) roles in India.

Nicolas Dumoulin, MD of recruitment agency Michael Page India, believes that uncertainty in taxations creates a lot of confusion. “The government keeps on changing the slabs every year, because of which there is uncertainty on what is the long-term trend and policy. Not knowing where the tax element is going could be uncomfortable for people making a decision.”

But according to organisational consulting firm Korn Ferry India, the taxes are substantial, but may not be the deciding factor for many who choose to work in India. “From an expat stand point, it does not matter because they come on an expat salary and renegotiate their take-home salary. If an MNC wants to hire them, they will hire them regardless of the tax structure,” said Navnit Singh, Chairman and MD, Korn Ferry India. As far as hiring Indian nationals living abroad is concerned, Singh believes that most employees tend to look at relocating back due to personal reasons or a bigger opportunity, with the added benefit of moving back home.

“People have and are willing to come back to India, including myself. However, if you start earning lesser than what you were, people will start going back. Potential talent can pay taxes up to 10 per cent because rupee has devalued anyway. Besides this, if the taxes increase at such a big scale, it has a big impact,” he said.

“Earlier, hiring an expat in the top management was essential; several international companies would hire at least a few expat employees. However, now it’s not the case anymore because the talent has been groomed well. Now, the hiring of expats would be as low as 0.1 per cent,” Dumoulin said.

According to Korn Ferry, TeamLease and Micheal Page, the ongoing economic slowdown is also adding to the concerns. “Decision-making in terms of hiring is getting slower. It’s likely to stay like this for the next two quarters. There is general pessimism in the country at the moment because of lack of liquidity, lending and several companies going to NCLT (National Company Law Tribunal),” Korn Ferry’s Singh said.