| Introduction: Contextual Introduction Body: Highlight the necessity and feasibility of wealth tax in India to address income inequality. Conclusion: Way forward |
India’s economic growth over the past decades has failed to translate into equitable access to basic needs like nutrition, healthcare, education, and housing.
Necessity of a Wealth Tax in India
- Addressing Extreme Inequality: Researchers at the World Inequality Lab have highlighted that most GDP gains in India have gone to the top 10%, intensifying wealth and income disparities. This inequality has stifled mass consumption demand, deterred private investment, and contributed to social divisions and political tensions. A wealth tax can help redistribute wealth and promote social harmony.
- Enhancing Public Spending Capacity: India’s tax-to-GDP ratio is among the lowest in the G20, restricting the government’s ability to fund public services. A fair wealth tax on ultra-high-net-worth individuals (UHNWIs) can generate substantial revenues for investments in healthcare, education, climate adaptation, and the green transition.
- International Precedents and Feasibility: A global minimum wealth tax, as proposed by Gabriel Zucman, could ensure that wealthy individuals contribute fairly regardless of asset location. Countries like Colombia, France, and the US have successfully implemented wealth taxes and exit taxes, countering fears of capital flight.
Feasibility of a Wealth Tax in India
- Administrative Feasibility: Advances in digitization and international agreements on financial information exchange have made tracking financial wealth easier. State governments already track real estate ownership, and systems can be extended to other forms of wealth.
- Revenue Potential: A global minimum tax of 2% on billionaires, as proposed by the G20, could yield significant revenue for India. Lowering the threshold to cent millionaires would further increase the tax base.
- Tackling Evasion and Avoidance: Strengthened frameworks for revealing beneficial ownership and international cooperation on tax residence coverage can curb evasion.
- Economic Impact on Investments: Evidence from other countries shows that wealth taxes do not deter investments or productivity. Exit taxes can mitigate risks of asset relocation or emigration.
Conclusion
A wealth tax is both feasible and necessary to address India’s rising inequality and generate resources for essential public spending. By ensuring that the super-rich pay their fair share, India can take a significant step toward reducing economic disparities and fostering inclusive growth. The government must act decisively to align fiscal policies with the principles of equity and social justice.
