This refers to “Budget 2020: Time to re-introduce wealth tax, says Abhijit Banerjee” (January 28). Notwithstanding Nobel laureate and economist Abhijit V Banerjee’s latest call for the re-introduction of a wealth tax in India considering the rising inequality, the nation’s current economic scenario does not justify such a plan. In fact, such a move might turn out to be counterproductive as our economy is facing a huge mismatch between demand and investments, which is essential to achieve the desired level of the economic growth. In fact, our experience shows the imposition of such draconian taxes has failed to serve the real purpose as such a regime is a fertile ground to breed ways to evade and avoid the same.
Mind you, the maximum marginal rate of income tax happened to be as high as 97.5 per cent during the tenure of Indira Gandhi (being the PM and FM both) in the 1970s. But it was later brought down, realising the folly of persisting with such a structure. As mentioned in this report, the archaic Wealth Tax Act 1957 was discarded in 2016, that is, during PM Modi’s first tenure. For sure, there must have been valid grounds for doing so. It might not be prudent to move back to such provisions, more so when the government is in the process of ushering in the much needed tax reforms to boost the economy.
SK Gupta, Delhi
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