In a recent research paper co-authored by economist Thomas Piketty, it has been suggested that India should implement a 2 percent tax on net wealth exceeding Rs 10 crore and a 33 percent inheritance tax to address the growing issue of inequality in the country.
Titled 'Proposals for a Wealth Tax Package to Tackle Extreme Inequalities in India', the paper advocates for a comprehensive tax approach targeting the ultra-wealthy to counter the significant concentration of wealth at the top of the distribution and to create fiscal space for vital social sector investments.
The proposed taxation scheme aims to generate substantial revenues while affecting only a minimal percentage of the population.
According to the paper, implementing a 2 percent annual tax on net wealth exceeding Rs 10 crore and a 33 percent inheritance tax on estates surpassing Rs 10 crore in valuation could generate a significant 2.73 percent of Gross Domestic Product (GDP) in revenues.
Furthermore, the paper stresses the importance of accompanying such tax measures with explicit redistributive policies aimed at supporting the poor, lower castes, and middle classes.
For instance, it suggests that the baseline scenario could nearly double the current public spending on education, which has remained stagnant at 2.9 percent of GDP for the past 15 years, falling well below the government's own target of 6 percent outlined in the National Education Policy 2020 (NEP 2020).
The authors emphasise the necessity of an extensive debate on the proposed taxation measures, with a consensus emerging from a broader democratic discussion on tax justice and wealth redistribution in India.
Authored by Thomas Piketty, Lucas Chancel, and Nitin Kumar Bharti, the paper underscores the recent surge in discussions surrounding income and wealth inequality in India, particularly following the release of their study, 'Income and Wealth Inequality in India, 1922–2023: The Rise of the Billionaire Raj'. This study revealed that economic disparities in India have reached unprecedented levels.
Highlighting the alarming increase in inequality, the paper notes that the income and wealth share of the top 1 percent of the of the population surged to 22.6 percent and 40.1 percent, respectively, in 2022–23.
It further points out that between 2014–15 and 2022–23, the rise of top-end inequality has been particularly significant in terms of wealth concentration. By 2022–23, India's top 1 percent income share is stated to be among the highest globally, surpassing even countries like South Africa, Brazil, and the US..
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