The paper, released on Friday, suggests imposing a 2% annual tax on net wealth over ₹10 crore, and a 33% inheritance tax on estates exceeding ₹10 crore in valuation. This could generate revenue amounting to 2.73% of gross domestic product (GDP), it said.
According to the paper, Towards Tax Justice & Wealth Redistribution in India: Proposals, based on the latest inequality estimates, 0.04% of the adult population holds more than a quarter of total wealth, and imposing this tax would leave 99.96% unaffected. “Progressive wealth taxation, effective redistribution, and broad-based social sector investments are urgently needed to build an equitable and prosperous India,” said Anmol Somanchi, one of the four authors of the report.
Near Doubling of Public Spending
The other three authors are Piketty, Nitin Kumar Bharti and Lucas Chancel. Bharti, lead author of the study, noted that this may also help establish trust, as it would put the money to more transparent use. “To develop trust among the rich, the government could transparently allocate the wealth tax revenues towards social sector spending – such as improving the quality of public schools and hospitals – which will lead to a more educated and healthy labour force,” Bharti noted in response to ET‘s queries.The additional revenue generated would allow a near doubling of the current public spending on education and other social sectors, closer to the 6% of GDP target the government has envisaged. Calculations
The study outlines baseline, moderate and ambitious projections.
“In that respect, besides addressing extreme wealth inequality, such taxes could also play a small role in weakening the rigid link between social and economic inequalities in India,” Somanchi said in the study. “For example, the baseline scenario would allow nearly doubling the current public spending on education, which has stagnated at 2.9% of GDP over the past 15 years, well below – less than half – the 6% target set by the government’s own National Education Policy 2020 (NEP 2020).”
The moderate scenario envisages 4.59% of GDP in additional tax revenues, with a higher 4% annual tax kicking in for people with over Rs 100 crore net wealth and 45% inheritance tax. The ambitious tax regime envisages a 3% and 5% annual tax on those with net wealth over Rs 10 crore and Rs 100 crore, respectively. Additionally, it places 45% and 55% duty on estates, amounting to tax collection of 6.08% of GDP.
