Debating the Viability of Inheritance Tax and Wealth Surveys in India
Amidst political discussions on wealth redistribution, economist Gautam Sen has voiced skepticism over the practicality of an inheritance tax and a proposed wealth survey in India. Sen’s critique follows Congress leader Rahul Gandhi’s advocacy for a socio-economic census and wealth redistribution, sparking a contentious debate.
According to Sen, the reality of India’s tax base is such that only about 2.4 percent of the population pays taxes, and an even smaller fraction possesses significant personal assets. He warned that any attempt to forcibly redistribute wealth could lead to widespread economic disruption and the potential closure of businesses.
Highlighting the behavior of the ultra-rich in response to taxation, Sen pointed out that many Indian millionaires have already relocated to Dubai, attracted by the absence of income tax. He suggested that further tax pressures could drive the billionaire class to migrate and re-register their businesses abroad, resulting in a substantial loss of wealth for India.
Sen drew parallels with Sweden’s experience with inheritance tax, noting that its removal led to the return of wealth and improved economic growth. He argued that eliminating such taxes can ultimately benefit the general populace through enhanced tax collection and subsequent redistribution.
The economist also addressed the comparison with the United States, clarifying misconceptions about inheritance tax—referred to as estate duty and gift tax in the US—and its limited application to a small percentage of estates.
Sen’s analysis suggests that India’s current approach, which fosters wealth creation alongside redistribution, is a significant improvement from past practices. He emphasized the need for realistic policy-making that considers the delicate balance between generating wealth and redistributing it for the broader benefit of society.
