For the finance Minister to note

News: World Inequality Report 2022 has pointed out that India is now among the most unequal countries in the world. Inequality today is as great as it was at the peak of western imperialism in the early 20th century. The pandemic has only worsened it.  

What does the report says about the inequality in India? 

Read here.

Nations have become richer, but governments have become poor. Global multimillionaires have captured a disproportionate share of global wealth growth over the past several decades. And companies continue to devise novel ways to escape the taxation.  

What are the factors that may lead to an increase in inequality? 

Government have recently tried to lower the tax rates.

– This reduces government revenue at a time of growing public deficit and declining public wealth.  

– Also, due to lower taxation on corporates, High-income individuals choose to incorporate their business so that they can shift income from personal income tax to corporate tax.  

Further, there has been recently a lot of discussion around the issue of global minimum taxation. 

– Around 130 countries had in July 2021 agreed for the introduction of the global minimum tax of 15% on MNCs. This is lower than what working class and middle-class people in high-income countries pay.  

– Most of the Big MNCs are working in the digital space like Metaverse, Microsoft, etc but as the digital access has not been equitable it will be a challenge to implement the proposed global minimum tax.   

What are the possible positive implications of global minimum tax on India? 

Read here. 

What are the apprehensions regarding India joining the implementation of global minimum taxation? 

Read here. 

What is the way forward? 

The World Inequality Report suggested a minimum global tax on MNCs at 25%.  

MNCs and their shareholders have been the main winners from globalisation. Their profits have boomed due to the ever-closer integration of world markets. Therefore, there is need for a socially conscious policymaking that supports equity.

Source: This post is based on the article “For the finance Minister to note” published in The Hindu on 31^st Jan 2022.