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Last updated: 27 Sep, 2014  

Tax.9.Thmb.jpg Higher taxes for the 'super-rich' a poor idea

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Bikky Khosla | 22 Jan, 2013
What the Indian economy would have looked like today if the last Union Budget hadn't introduced the controversial GAAR provisions? Probably a little brighter. Although later the then finance minister Pranab Mukherjee announced deferment of the regulation to April 2013, the confusion persisting over it continued to impact investor sentiment during the following months. Only recently, the government, as a corrective measure, again deferred implementation of GAAR by two years till April 2016, but already a lot of damage has been inflicted by the fuss and uncertainty that could have simply been avoided.

And now, ahead of the 2013-14 Union Budget, a new issue is in the air -- higher taxes for the "super-rich". Recently, PM's economic advisor C. Rangarajan also voiced for imposing higher taxes on the "super-rich" (although the definition is still not clear), but I think such a measure, if introduced, will result in similar uncertainty and self-inflicted wound. Personally I don't think that GAAR, which is designed to curb tax evasion, is something that should be avoided like the plague. Neither at this moment I'm interested in initiating a debate on whether the 'super-rich' should be taxed higher or not. My prime concern is that the time is certainly not right to go for any such moves.

In these troubled times when the Indian economy is facing a number of challenges both at the domestic and international fronts, imposing higher rate of tax on high income group taxpayers would create confusion and damage the already-shaken confidence of the investors. The Centre, instead of talking about such populist measures, should make an all-out effort to widen the tax net. It's a well known fact that there is vast scope to include more people in the tax net and ensure all income is taxed by improving tax administration and tax compliance.

In addition, I think that higher taxes could encourage evasion. Apart from that, India now has only around 1.7 million tax payers (out of a total 35 million) who earn more than Rs 10 lakh annually. Looking at this statistics, I wonder currently how many tax payers are beyond the present 30-percent highest tax slab and how much difference taxing them higher will make to the tax-GDP ratio, money-flow, or fiscal health of the economy. In contrast, better tax administration could make a big difference, and that can be done without inviting further trouble to the economy.

As an entrepreneur, I am finding it difficult to take heart from the idea. This is against entrepreneurship. At this crucial juncture, the Centre should shoulder the responsibility of pushing the industry by encouraging entrepreneurs to create companies, products, services and jobs rather than pushing them into a corner. Similarly, the suggestion to reintroduce inheritance tax -- raised by Finance Minister P Chidambaram -- is again surprising. Isn't it immoral for taxman to stand between our wealth and our children? Instead, the Centre should concentrate on tightening the noose around public spending and preventing corruption.
 
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Tax based on asset
Kunnakkattu | Tue Feb 19 03:04:40 2013
Like all Indian laws, if law is framed to define super rich it will be confusing. But instead of Income tax it can be Property tax cum income tax. People normally evade tax on income. Property is fixed (immovable) in the custody of a person and can be taxed based on its value. Let all the corrupt politicians to sell of their property if they do not want to pay property tax. This theory will not come to effect as all politicians and bureaucrats are investing in real estate.


why are you worried
Andy | Mon Feb 11 21:08:09 2013
In a country 80% poor should not be a crime to ask the rich to pay more unless you were one of the royal family who brought your fortune from God. You make money on the back of your country God bless you make more of it but STOP being a baby like New York Gangsters (Wall Street). Look at modern Germany where wealthy people pay more taxes and the German economy is better growing than the US or your India. India need more taxes to finance education (modern education) to her citizens probably the only country who has the chance to put millions of tech oriented work force then people like you can earn more refund through the new founded labor force, India need a new high way soon not later that need big/more money. You and the rest of wealthy people should be grateful to your blessed country for not having war .TAX is OK as well as you control the back door spending, that is what modern India should fight. Most politicians around the world is financed by people like you meaning you know how to STOP the back door spending. If a school contract cost 10 million politicians /Government approve for 50 million remember Halliburton 60 million dollar over payment -that is a back door spending India has the same problem. That is what modern India should fight not paying tax. Andy Hailue Palm Springs Ca


Yes , why not?
Ramesh Logho | Fri Feb 1 11:46:52 2013

Yes , why not? This makes absolute sense to me! Anyone making more then Rs. 50 crore per annum should be taxed at the rate of 50% for earnings above 50 crore and 30% can be applied for their earnings up to Rs. 50 crore, as it would not make much of a difference to their personal income. Secondly what's wrong in slapping inheritance tax also? The like of Ambanis and Birlas would be leaving thousand of crores for their children as inheritance, by virtue of these children being born in these family, and come into vast wealth not by their hard work, hence it makes sense to tax these children by at least 10% of their inheritance and these can be earmarked for the education and healthcare of those underprivileged children.



'Crime' of creating wealth!
Shrinivas Moghe | Fri Jan 25 08:26:30 2013
Let our Government do it, but before doing so, Mr.Finance Minister should talk to our Law Minister. Together, they should declare it (to be super rich) as a crime, which needs to be reprimanded. This done, they can book the super rich for their crime of creating wealth, and become super rich. Tax them in such a way that no one should dare to indulge in wealth creation, to become rich and then super rich. And the best way to do this is to nip them at the budding stage only. Who knows, a today's entrepreneur may become a tomorrow's dirty super rich, eh? Why take a chance Mr.FM?


Only honests are punished further
Abhay | Fri Jan 25 07:02:54 2013
The black money is very big issue and the govt is not doing anything about it. The trader community hardly pays any taxes, which mostly work on cash basis. Only honest taxpayers are punished further and further and thieves are getting away without paying anything.


Higher taxes for the rich in South Africa
Roger Hall | Thu Jan 24 17:03:02 2013
Wise words indeed. Here in South Africa it is commonplace for the authorities to target the more affluent sectors of society because they are easier to locate and punish for non-compliance. Widening the tax net (or doing away with income tax altogether and substituting higher sales tax) for example would be a far more equitable way of taxation. And Amen to rooting out corruption and introducing tighter fiscal and budget controls - this is a big problem in South Africa. Best of luck!!


No higher taxes for anybody
Sunny Malik | Thu Jan 24 12:24:28 2013
Why is the Govt not curbing its expenditure by retiring its unproductive, unaccountable employees ? Why are Pay Commissions in fact, pay increases made frequently, these are inflationary? Why is the Govt doling our welfare schemes with lakhs of crores of tax money?These strain budget and push up deficit. By being elected, it needs to seek a Veto from voters, tax payers before welfare schemes instead of permission from Party President. Why are rich MPs, farmers with agricultural income not taxed ? Where is clean water, electricity, schools, colleges,healthcare, roads public transportation, security for citizens ? They are made to pay taxes for such. Why can the Govt not widen tax base ? Spend money . There are many unanswered similar questions.


Stop tax cheaters
Gowindstar | Wed Jan 23 17:45:17 2013
The country is riddled with tax cheaters and fraudulent businessmen. The country needs revenue to keep the government machinery moving. The poor are broke and starving and the crooks are siphoning money left and right. Question is ...who pays the bill? People who have the money. The corruption has to be stopped and the rogues punished with heavy fines...This will generate some revenue. 


Higher taxes on super rich
K K Agarwal | Wed Jan 23 08:44:45 2013
Very well stated that just raising taxes will not solve the issue, the main issue lies is that our tax collection is also very expensive, we need to move into a system where by the assessment of tax payers are more based electronically other than manually thus reducing corruption and cost effective way of tax collection. The best way to widen the tax net and lower the procedure and corruption in tax department is to introduce transaction tax where by just charge 5% on every transaction carried out, whether it is in profit or loss but that amount straight goes to the govt with out any rebate or deductions and no other tax is applicable. This will be like just check the transactions and the tax of 5% collected on it. The amount collected will be not only enormous but very effective without any manual interception and corruption on assessment. IF only the turnover of the listed companies is taken into account and 5% over it will be enough of the amount we collect totally in form of direct and indirect taxes. Every Indian would be covered under this tax net where by any transaction done is taxed just at 5% without undergoing multiplicity of taxes at every level. The turnover in Banks can itself give u the amount of tax to be collected. Secondly to overcome the dollar rupee and the tax to be collected on the amount placed overseas, an amnesty scheme should be bought in where by pay 20% to the govt no questions asked and than u can invest in India n not repatriate for 5 years.


High tax for the politician
Uma Karthik | Wed Jan 23 08:32:08 2013
Dear Sir, It is really ridiculous to note that the main looter of this country, the politicians are exempted from the tax. Are they not Indians?On what basis they pass the bill profitable to them . Isn't it look that they cheat the nation?. But Govt. is ready to Tax even the poorest of this country why not the politician. Let them put any tax , but everyone should be included except the MARTYRS.


Why not ?
Subhasis | Wed Jan 23 06:29:32 2013
A super rich earns more than 20 times the common man. 2% of super rich earns about equivalent to 98 %. A higher tax on this 2 % about 60% for a period of 10 years will definitely solve the long term problem and can create the road for a developed India from under developed country.

  Re: Why not ?
Common Sense | Thu Feb 21 00:06:09 2013
Ok what super rich do with money. They can not take to next life. They going to spend it and if not well it keeps inflation down. All talk about how bad the rich are just agitation and propaganda for the masses to stir them up. look what happened in Russia! After killing all the rich people in Eastern Europe also they become more poor than ever. How about not making so many babies that fathers can not feed or school. It will never end because the more money is given to the poor the more poor people are created by having more energy making babies. What we need is change of thinking more sense of community and cooperation and power to the individual not having to wait for government to solve problems. Yes sounds dangerous but in the end that is what going to happen. Either war or illness do the job if we not do it with social structures. We are not born and never be equally talented so never be same affluent either.


Show of wealth
Anil Kaul -9967650065 | Wed Jan 23 04:49:38 2013
I am in agreement with the writer that as of now nothing new of this sort should be initiated to disturb the whatever growth rate is there . But the very idea of taxing super rich has gatherhed wide support in view of unwarranted show of wealth by this generation of super rich people like Mukesh Ambani, Vijay Malaya & others. Such display is also immoral on the part of these so called responsible citizens of India. To correct behavioral aspect of such super-richness I support taxing Super Rich with a higher tax rate.


Look at growth not tax
Dr.ramesh | Wed Jan 23 03:43:45 2013
I agree with the author of the editorial as this attempt would scuttle the growth . The concept of taxation should be transparent that voluntarily citizen of this country should be willing to contribute his bit for the development of the nation. The methods adopted by the government is incorrect and they should stop spending on popular schemes for their vested interest to be back in power. The hard earned money money paid by the tax payer is not utilized in nation building . The concept is itself wrong this would make lots of entrepreneur to look at other nations to move to set up their industries and businesses and hence a brain-drain. The finance minister should look at the growth rather than to tax by burdening the tax payers . Lets hope the ministry wouldn't turn a deaf ear.  


If you earn more you already pay more Tax
A C Quinn (Author) thats why I'm poor | Wed Jan 23 00:27:27 2013
Higher taxes for the rich are just silly, you cannot cry out for equal treatment of all citizens then screw your neighbors because of your life. A man who earn ten times what you do pays ten times the tax, it isn't rocket science. The flaw is write offs and always has been, if a company is only paying 1 cent in the dollar tax from billions there is your flaw, we need to limit tax write offs/ reinvestment to one third of profits. So if tax was a flat 30% for everyone, even the rich and companies would still have to pay 20 cents in the dollar on all profits, giving us the trillion in tax we need around the world. To say it curbs economic growth is absurd, if we are not gaining by the reinvestment in tax and only the company gains by increased value and shares thus higher salaries and Villas in the south of France for those involved, it shows slower company growth is better for the nation and its citizens, the creation of new jobs is worthless if no one wants Chinese wages because we all know from history the level of who is rich will simply get lower once we allow governments to say "all citizens are not equal, if you are doing well you are wrong I say wrong are  the incompetent managers of our country. Is rich is the new black? It is discrimination. I am not rich, hell I buy home-brand food when I go shopping, but segregation by any means is the sign of a dictator and evil scumbags no matter who you are. A C Quinn



Abolish tax
Sagar | Tue Jan 22 22:24:23 2013
A Country like India should convert its huge population into an advantage. My suggestion is abolish tax. And give a choice for individual contribution at will . Just calculate the revenue even if every person pays Re 1 per head per day- even a beggar can afford that.


Frustration of economic policy makers
Ghanshyam Gola | Tue Jan 22 17:51:29 2013
This idea reflects the frustration of economic policy makers. The process of economic policy making is a dynamic issue and it can't be made or duplicated on a past applied pattern. What is really needed is an intelligent innovative breakthrough pattern best suited to the need of the hour. The ministry should initiate dedicated dialogue among best rated Indian institutions to search, debate and propose a widely effective high yield taxation pattern for current Indian economics.


Higher taxes for the rich
H.S.Chawla | Tue Jan 22 17:13:06 2013
There will be no classifications for the rich or the super rich and if one was to understand that the rich get taxed @ 30% plus taxed on wealth tax, whatever they manage to save they invest in the growth of their enterprise, growth and promoting progress and employment. In the current times with the real estate having touched crazy values and disputes within families properties are locked up in litigation how are they to liquidate to pay off the so called estate duty now termed as inheritance tax . First the loss of their loved ones and than the thought of being homeless. It wasn't without considerable thought. The same was abolished when our then prime minister passed away that this archaic law cane to light as one that didn’t propagate solace in ones loss rather one that caused unhappiness of having lived , This would bring back the dual economy that the government has so successfully managed to curtail , and in any case rather than the government running after the estates of the few that died and wind them up it would be in order to create a environment of progress and harmony , a world dedicated towards uplifting the week and not making the rich poor , for let us understand that it is the rich who do create jobs , create charitable institutions ,and do have the capacity and capability to carve paths of progress and prosperity.


Time to sacrifice for the rich
K. Venugopal Prasad | Tue Jan 22 16:46:51 2013
When the country is going through a turbulent period, all sections of the society has to sacrifice something. Today the poor & the middle classes is doing the sacrifice without any complaint, accepting the phenomenal price rices, cutting back on all their comfort. Unfortunately they do not have any associations, or spokesperson to defend their plight. When it comes to the rich & the super rich to do some sacrifice like paying a higher rate of tax, to lend a helping hand to the country, then everyone in the media and associations cry hoarse. The fear that in case they are taxed higher they will evade taxes, is an insult to our country, with such selfish, and unpatriotic business houses. Such business houses should be punished severely, and banished, for cheating the nation in the time of need. I am not against tightening the loopholes, and improving the tax collection. But who are these persons who escape taxes, due to loop holes. They are the mighty & powerful of this country. The media, politicians, bureaucrats, are equally responsible, for leading the country & its citizens to such difficulty, by being absolutely greedy. I agree that it is natural for businessmen to be greedy, but in times of need they should show their patriotism. Unfortunately the poor & the middle class are hapless, unrepresented and unsupported. It is a shame.


Way to treasure
Ravi | Tue Jan 22 15:46:57 2013
Instead, the Centre should concentrate on tightening noose over public spending and preventing corruption. Are you thinking of shut out the way of politicians to go to heaven directly with their families ( which they are enjoying by hereditary - the privilege of only the families of politicians) ?


Tax luxurious consumption
Shyam | Tue Jan 22 14:59:53 2013
Taxing luxurious consumption at higher rate would automatically widen the tax net. As of now super rich number is based on honest tax payers in higher income group. There are large number of Indians who fall in this group but do not report their real income. They will not be able to avoid taxes imposed at consumption end as opposed to income end. High cost jewelery, property, cars, yachts, private planes, watches, pens, dresses club membership, hotel accommodation, electronic gadgets and such other items of luxury should be taxed higher. Such measure will not affect entrepreneurs and growth of investment in enterprises. Be it rich politicians, farmers , artists, players,businessmen and so on, all of them will pay higher for luxurious consumption and there should be no problem with them as they can afford to pay extra money. But to do so a logical price line will need to be drawn for luxurious items.


 
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