While the pandemic impacted the lives and livelihoods of millions of Indians, forcing many out of employment, the richest billionaires in India increased their wealth by 35 per cent.
India’s top 100 billionaires saw their fortunes increase by Rs 12.97 trillion — enough money to give every one of the 138 million poorest Indians a cheque for Rs 94,045 each.
On the other hand, 170,000 people lost their jobs every hour in the month of April 2020, the report points out.
“In fact, the increase in wealth of the top 11 billionaires of India during the pandemic could sustain the NREGA scheme for 10 years or the health ministry for 10 years,” according to Oxfam’s calculations.
Last week also witnessed the release of The White Tiger on Netflix. Based on the bestselling novel, it’s a wry, blistering critique of inequality in India — and elsewhere.
India's per capita Gross Domestic Product at constant prices is projected to decline 8.7 per cent to below Rs 1 lakh for the first time in the last three fiscals, as per the National Statistical Office.
At a time when the Indian economy is expected to contract by 7.5% this year and the government is struggling to meet its revenue targets and amidst the backdrop of rising inequality, the clamour for taxing the rich is gaining ground.
Taxing the rich is a touchy subject in India. A section believes that at a time when we are on the path of economic recovery, such tax will send a wrong message and dampen the sentiment.
As per a Morgan Stanley report, nearly 23,000 dollar-millionaires have left the country during 2014-17, taking India to the top of the exodus charts.
A comparison with other countries shows that our 20% tax rate kicks in very early at an income of above Rs 5 lakh ($ 6,800). However our highest tax rate is not amongst the steepest in the world.
The effective tax rate for the super-rich in our country can go up to 42.74%. This compares to 47.3% in the United States, 59.1% in the United Kingdom, 53.6% in Australia and 53.2% in South Korea.
In many countries around the world the super rich pay up to half of their income as taxes. This shows that there is scope for a hike in India.
Even in the United States ‘tax the rich’ policies are being weighed in some states to make up for the COVID-era budget shortfalls. The pandemic era has resulted in job loss for those at the bottom of the pyramid and soaring wealth for those at the top. Inequality has only worsened during this period.
This so-called ‘K shaped’ recovery means the richest Americans are in a better position to absorb higher taxes relative to low and middle earners, according to some economists.
And here we are not just talking about tax on salary/wages, but tax on property purchases or sale, tax on stock market capital gains, tax on wealth (inheritance tax), et cetera.
Shankar Aiyar in his BloombergQuint piece argues for such a tax.
“Therefore there is a case for a one-time tax on the unrealised stock market gains of dollar billionaires in the current financial year (April 2020 to March 2021).”
A small portion of the gains of private individuals should be returned to the public exchequer as a gesture of goodwill, in recognition of the humongous cost of the crisis on millions of have-nots, he further argues. This a bit extra contribution may not pinch them more.
Economics Nobel Laureate Abhijit Banerjee has been a votary of taxing the rich more to fill the income gap for quite a time now.
In India, only around 1 lakh tax filers show taxable income of over Rs 1 crore. They are not electorally significant in terms of the votes but they do carry enormous influence in finance and business matters.
Many of them are entrepreneurs running big companies, employing thousands and contributing lavishly in funding to political parties.
However, the salaried or professionals among these crorepatis can move to low tax countries, more so in an environment where work from home is gaining ground, in a high tax environment. The fact that this is just one-time tax, negates this risk.
Perhaps, it is also time to tax the super rich farmers. Farmers having an annual income of more than Rs 50 lakh should be brought into the tax ambit.
This entire exercise needs to be sold as the contribution of the rich for nation building in these uncertain and tough times.