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India needs to impose a 2 percent tax on net wealth exceeding Rs 10 crore and a 33 percent inheritance tax to deal with the problem of rising inequality in the country, a new research paper co-authored by economist Thomas Piketty has suggested.
The paper titled Proposals For a Wealth Tax Package to Tackle Extreme Inequalities in India propose a comprehensive tax package on the ultra-wealthy to tackle the massive concentration at the very top of the wealth distribution and create valuable fiscal space for crucial social sector investments.
"Raise phenomenally large tax revenues while leaving 99.96 percent of the adults unaffected by the tax.
"In a baseline scenario, a 2 percent annual tax on net wealth exceeding Rs 10 crore and a 33 percent inheritance tax on estates exceeding Rs 10 crore in valuation would generate a massive 2.73 percent of Gross Domestic Product in revenues," the paper suggested.
The paper said that the taxation proposal needs to be accompanied by explicit redistributive policies to support the poor, lower castes, and middle classes.
"For example, the baseline scenario would allow nearly doubling the current public spending on education, which has stagnated at 2.9 percent of GDP over the past 15 years, well below -- less than half -- the 6 percent target set by the government's own National Education Policy 2020," it said.
The paper noted that the taxation proposal needs to be extensively debated, with a consensus on specific details of the design emerging from a broader democratic debate on tax justice and wealth redistribution in India.
The paper has been authored by Thomas Piketty (Paris School of Economics and World Inequality Lab), Lucas Chancel (Harvard Kennedy School and World Inequality Lab) and Nitin Kumar Bharti (New York University and World Inequality Lab).
According to the paper, debates on income and wealth inequality in India have gained significant momentum in recent weeks, partly following the release of our study Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj, which revealed that economic disparities in India have reached historical highs.
These extreme inequalities and their close link with social injustice can no longer be ignored, it said.
The authors in their working paper released on March 20 had said inequality in India has skyrocketed since the early 2000s, with the income and wealth share of the top 1 percent population rising to 22.6 percent and 40.1 percent, respectively, in 2022-23.
"Between 2014-15 and 2022-23, the rise of top-end inequality has been particularly pronounced in terms of wealth concentration.
"By 2022-23, top 1 percent income and wealth shares (22.6 percent and 40.1 percent) are at their highest historical levels and India's top 1 percent income share is among the very highest in the world, higher than even South Africa, Brazil, and the US," the paper had said.