India should implement 2% tax on wealth and 33% inheritance tax to tackle rising inequality, says study

By: Admin
May 25, 2024
Categories: TAX News
4 Min Read

A new research paper, suggests that India should implement a 2% tax on net wealth over Rs 10 crore and a 33% inheritance tax to address the growing issue of inequality in the country.

The paper titled ‘Proposals For a Wealth Tax Package to Tackle Extreme Inequalities in India’ suggests a comprehensive tax plan targeting the ultra-wealthy. This aims to address the significant concentration of wealth at the top and generate funds for essential social sector investments.

“Raise phenomenally large tax revenues while leaving 99.96 per cent of the adults unaffected by the tax. “In a baseline scenario, a 2 per cent annual tax on net wealth exceeding Rs 10 crore and a 33 per cent inheritance tax on estates exceeding Rs 10 crore in valuation would generate a massive 2.73 per cent of Gross Domestic Product (GDP) in revenues,” the paper suggested.

The paper emphasized the importance of accompanying the taxation proposal with explicit redistributive policies to assist the poor, lower castes, and middle classes.

“For example, the baseline scenario would allow nearly doubling the current public spending on education, which has stagnated at 2.9 per cent of GDP over the past 15 years, well below — less than half — the 6 per cent target set by the government’s own National Education Policy 2020 (NEP 2020),” it said.

The paper emphasized the need for extensive debate on the taxation proposal, aiming for a consensus on the design details through a broader democratic discussion on tax justice and wealth redistribution in India.

The paper stated that discussions on income and wealth inequality in India have intensified in recent weeks, partly due to the publication of their study titled ‘Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj’. This study unveiled that economic disparities in India have reached unprecedented levels. It emphasized that these extreme inequalities, closely tied to social injustice, can no longer be overlooked.

In their working paper released on March 20, the authors highlighted that inequality in India has surged since the early 2000s. They noted that the income share of the top 1% population rose to 22.6% and their wealth share to 40.1% by 2022-23. Particularly, between 2014-15 and 2022-23, wealth concentration at the top has seen a significant increase.

“Between 2014-15 and 2022-23, the rise of top-end inequality has been particularly pronounced in terms of wealth concentration. “By 2022-23, top 1 per cent income and wealth shares (22.6 per cent and 40.1 per cent) are at their highest historical levels and India’s top 1 per cent income share is among the very highest in the world, higher than even South Africa, Brazil, and the US,” the paper had said.

Source from: https://www.businesstoday.in/india/story/india-should-implement-2-tax-on-wealth-and-33-inheritance-tax-to-tackle-rising-inequality-says-study-430913-2024-05-25