CHALLENGES IN TAXING SUPER RICH IN INDIA.

 INEQUALITY

India has already been ranked as the 5th largest economy in the world GDP  and poised to reach $ 7.3 billion by 2030 and$10 trillion mark 2035,  set to become 3rd largest economy and eventually a developed economy by 2047.However since liberalisation, privatisation and globalisation of Indian economy our GDP growth expanded breaking  "Hindu Growth " barrier and entered into a new growth trajectory, This new growth trajectory was buttresed by robust domestic demand, increased investment in infrastructure by the Government and strong private consumption particularly among high income groups. The objective is to become a developed economy by 2047.Despite stellar growth performance in recent years India remains one of the most unequal country of the world with top 10% of population holding 77% of the total national wealth. The richest 1% of the Indian population owns 53% of the country's wealth as against the share of the bottom half has shrunk to mere  13%. 

According to French economist and specialist in Inequality studies Thomas Piketty,  India should tax more of  it's super rich given its extremely high level of inequality in income and wealth. Piketty's best selling work "Capital in the 21st Century " advocated  the need to follow through the July pledge of Group 20 Finance Ministers of major economies to cooperate effectively in taxing world's largest fortunes.Various aspects of the dynamics that drive accumulation of capital and its flows throws many questions about the long-term evolution of basic social problems like inequality, poverty and vast concentration wealth amongst a minority of population bracket,and how the prospects of economic growth of a developing country lie at the heart of the political economy. Piketty analysed 21st century capital flows update data for 20 countries. The central theme of his work is that when the rate of return on capital (r) is greater than the rate of economic growth (g) over long term the result is concentration of wealth.As remedial measure to ease inequality Piketty proposed - improving education systems and considers diffusion of knowledge, skills and diffusion of ideas  of productivity as the main mechanism that will lead to tackle inequality and associated problems. 

DIMENSIONS OF INEQUALITY IN  INDIA 

World inequality lab pointed out that in India the top one percent of  the population's  income share increased significantly from 13% in1922,to 20% during interwar period but declined to 13% at the time of independence, 6.1% in 1982 and eventually witnessed rapid increase  to 22.6% in 2023.Moreover the number of  billionaires in India rose manifold from mere one in 1991 to 162 numbers in 2022.The rise of billionaire Raj and crony capitalism also contributed to alarming inequality in India. Last year the cumulative wealth of India's 100 billionaires itself surged over $ 300 billion reaching $1.1 trillion driven also by stock market rallies. The concentration of wealth among India's richest has surpassed  even wealthier nations including that of  USA. The middle class of India is the fastest growing large segment of  the population estimated to increase at 6.3% annually to reach 432 million in  2021,constituting about 31% of population as against 14 % in 2005.It has been observed that during the last two decades since 2000 technological change in India shot up demand for high skilled workforce while reducing cutting down employment opportunities for low skilled both in manufacturing and service sectors. This technological change also moderately added  to India's income inequality. 

SUPPLY SIDE ECONOMICS  AND INEQUALITY 

Taxing super rich is considered to be the  main  remedy suggested by econmists like Piketty to tackle inequality along with promoting income generating activities or "leveling up "the marginalised sections  of the society .However a look at economic policy of India shows that income tax rates imposed were exhorbitantly high in 1970s with unusual  highest rate of 97.75%  and  11 ttax slabs so far, with reforms currently reaching a tax rate of 30% comprising of  three slabs.It may be noted here that when Keynesian demand side policies failed to tackle stagflationary conditions in the global economy particularly in US and UK gradually the support for supply side Economic policies gathered momentum. Supply siders believes in giving incentives to producers to  save,invest ,produce and employ. They considered tax cuts as an effective means of raising growth in the economy. In fact professor  Arthur Laffer depicted the relation between tax rate and total tax revenue  wherein he showed that  'Laffer Curve' which shows that as tax rate increases tax revenue also increased upto a certain optimum point, beyond that as tax rate increases tax revenue falls. Supply side measures have prompted Governments to follow tax cuts and other incentives to help the producers.After the introduction of economic reforms in 1991 prevailing high tax rates were substantially reduced and a shift towards moderate tax reforms had gained wider  acceptance.The various tax reform committees were headed by eminent economist like Raja J Chelliah,Direct Tax code committee 2009,Parthasarathi Shome Committee 2012 etc.  According to RBI greater push for supply side reforms and harnessing of new technologies such as AI can be utilized .

TAXING SUPER RICH 

 Measures suggested to tackle inequality included reduction of concentration of wealth, implementation of land reforms, reduction if not abolition of crony capitalism which leads to monopolistic or oligopolistic tendencies in the economy.According to Picketty if India is taxing the super rich adeqately to address inequality by imposing 2 % wealth tax and 33% inheritance tax, the consequent increase in revenue is estimated to be 2.73% of GDP to the exchequer. In India  Government abolished wealth tax  in 2015 and has rejected calls for its return and also the call for  introduction of an inheritance tax continuously so far. In fact both Finance Minister  and official economists are generally not in favour of imposing wealth tax or inheritance tax citing reasons  like chances for outward flows of investment resulting in fall in demand domestically which could adversely hit the middle and aspirational classes in the  country. Globally countries like Belgium, Austria, Denmark and Finland imposes  taxes at the rate of 50% and above. At the other extreme  those countries that receive substantial national revenue from alternate sources like oil comprising of UAE, Kuwait, Qatar etc and tax havens are not imposing  income tax in their respective territories.Consequently  it follows that the political will and determination are  more significant to take measures to regulate inequality even if  it is a partial attempt it can achieve more inclusive growth.