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News: The government’s fiscal policy is pro-rich and anti-poor. It is depriving the exchequer of some of the resources it needs to handle issues such as climate change.
Why it is said that the government’s taxation policy is anti-poor and pro-rich?
Pro-rich policies:
Replacing the wealth tax with an income tax for households that earned more than 10 million rupees annually.
Reduction in the corporate tax rate for companies from 30 percent to 22 percent.
Corporate tax for manufacturing firms incorporated after October 1, 2019, was reduced from 25 to 15 percent.
Increasing the income tax exemption limit from Rs 2,00,000 to 2,50,000. The tax rate for incomes up to Rs 5 lakh was also reduced from 10 to 5 percent.
Increased indirect taxes: Pro-rich taxation policy has deprived the state of important resources. To compensate for the decline of direct taxes, the government has increased indirect taxes. Indirect taxes affect all Indians, irrespective of their income. For instance, taxes on petroleum products
Why the government should resort to a progressive taxation policy?
Reduce inequality: A 2018 Oxfam report revealed that 10 percent of the richest Indians hold 77.4 percent of the nation’s wealth.
To mobilise funding for welfare schemes: According to The IIFL Wealth Hurun India Rich List of 2019, a tax rate of four percent on the nation’s 953 richest families would give the government the equivalent of one percent of India’s GDP.
In addition to that, the country has one of the world’s fastest-growing populations of millionaires. The average wealth of these millionaires has increased by 74 percent over this period
Source: This post is based on the article “Why India’s pro-rich, anti-poor taxation policies must change” published in Indian Express on 20th November 2021.
