The paper, released on Friday, suggests imposing 2% annual tax on net wealth exceeding Rs 10 crore and a 33% inheritance tax on estates exceeding Rs 10 crore tax in valuation. This could generate revenue amounting to 2.73% of gross domestic product (GDP), it says.
As per the paper, 0.04% of the adult population holds more than a quarter of the total wealth, and imposing this tax would leave 99.96% of the adults unaffected by the tax.
“Progressive wealth taxation, effective redistribution, and broad-based social sector investments are urgently needed to build an equitable and prosperous India,” Anmol Somanchi, one of the four authors of the report, said.
The other authors are Nitin Kumar Bharti and Lucas Chancel.
The additional revenue generated would allow nearly doubling of the current public spending on education and other social sectors.”In that respect, besides addressing extreme wealth inequality, such taxes could also play a small role in weakening the rigid link between social and economic inequalities in India,” Somanchi, said in the report.The report follows an earlier paper released by the World Inequality Lab, which had said inequality in India has widened since the early 2000s with the income and wealth share of the top 1% of the population rising to 22.6% and 40.1%, respectively, in 2022-23.
The income share of India’s top 1% is among the highest in the world, topping even South Africa, Brazil and the US, it said.
The working paper titled “Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj”, authored by Thomas Piketty, Lucas Chancel and Nitin Kumar Bharti, had triggered a debate regarding rising income disparity.
The report comes in the midst of India’s general election, which has seen intense debate on a suggestion on inheritance tax put forth by an Opposition party leader.
A few days ago, Sam Pitroda, a senior Congress leader and chairman of Indian Overseas Congress, had backed inheritance tax and called for a debate on wealth redistribution in the country. The Congress party soon distanced itself from Pitroda‘s comment. Pitroda, subsequently, stepped down from the post of chairman.
India had experimented with taxing the rich in the form of estate tax and wealth tax and a gift tax, which were later abolished due to low collections and high administrative cost.
Content Source: economictimes.indiatimes.com