Taxation is a sensitive subject in India. If the tax collection in a given quarter surpasses the projected revenues, it is clear that the additional collection is coming directly from the pockets of middle-class individuals; if the collection falls short of the predicted figures, the government is chastised for not taxing the wealthy.
Only about 1.7 percent of Indians pay income tax, and the major cause for economic disparity in India is a direct result of taxing the lowest strata of society rather than the affluent. In India, people with ordinary employment pay income taxes ranging from 0% to 30%, while super-rich billionaires pay nothing. Rich individuals do not get a salary; instead, the majority of their income comes from assets such as bonds, stocks, and real estate, and these investments are taxed as capital gains, with the highest tax rate hovering around 20% in the long term.
The wealthy, who have a lot of money, play it wisely. They understand that they will not be taxed for possessing an investment unless they sell it. As a result, people like Jeff Bezos take advantage of this and pay no taxes. His whole value is based on Amazon stocks, and it is not taxed till he sells them to convert it to actual money. Similarly, one’s stocks might be kept as a collateral asset. So, if you borrow money with the security of stocks and live off of it, there will be no taxes. That is exactly what Elon Musk does. Over the years, the wealthy have devised some ingenious methods of evading taxes. Have you ever pondered why owning art is such a privileged experience? Why do the wealthy have their homes adorned with expensive artworks of little significance? Because art is simply another means of transferring the burden of growth to the middle class. They will purchase an artwork for $10 million and keep it someplace. The associate gallery inflates the value of the artwork by discussing it in elite art circles. The art’s value skyrockets from $10 million to $50 million. The individual subsequently donates the picture to a museum and receives a $50 million charitable tax deduction, allowing him to obtain benefits worth $40 million by paying only $10 million.
There are many complex factors in India that make taxation such a difficult subject. Long have Indian administrations believed that India needs the affluent more than the rich need India. The government is pleased as long as it can persuade the top 1% of our people to pay a pittance of their money to the country’s development in the name of tax breaks and perks. The government recognises its faults, as well as its lack of initiative and real influence in areas of need, and so feels compelled to brown-nose the wealthy. To retain the affluent in India rather than having them move their money to Swiss banks or the Cayman Islands, the Indian government takes intentional efforts to keep them satisfied with the political/business climate. Another aspect to consider is the degree to which the corporations and the government are linked. How can the government properly charge the firms engaged in the construction and operation of the tax-collection portal? How can the government properly tax the wealthy businesses who spend tens of thousands of dollars on political rallies in the run-up to elections to ensure victory? This closeness makes it hard for fairness and justice to infiltrate.
The fundamental goal of collecting taxes from the general population is to combine their nominal resources and generate a large quantity of money that can be invested in the economy as a whole. This money may be allocated in such a way that a significant portion goes toward rural development, ensuring equality in resource allocation in India. In fact, however, the wealthy avoid paying taxes, and the government collects funds from the same individuals it seeks to promote. Furthermore, despite receiving money from the hard-earned income of the middle class, the government performs a poor job of bringing about meaningful change in the country. Nobody knows whence the money originates from or where it goes. This is why individuals regard paying taxes as a waste of their hard-earned money, dismissing the government’s assertions that taxes are imposed for the better welfare of society.
The only approach to address inequality is to create an honest tax administration that is really dedicated to the objective of taxes. According to the IMF’s fiscal monitor, boosting taxes on high earnings is an effective means of decreasing inequality while having no negative impact on economic development. The government must treat wealth and inheritance taxation as seriously as income taxation, since if wealth is not taxed but income is, the wealthy have no incentive to invest their capital effectively. Taking the initiative will not be enough to close the gap between the affluent and the poor that we have created. Demonetisation was intended to be a positive move in the right direction, yet even a well-intentioned plan could not compensate for bad implementation. Demonetisation resulted in a 26 percent rise in the wealth of the wealthy and a 1 percent decrease in farmer income growth. We did become a black money-free country, but not by tracking it down at its source. Once again, the wealthy took advantage of loopholes to easily convert all of their black money into white. The money intended for national development was never discovered, and we once again failed the poorer strata of our society, who suffered the most.
With Alexandria Ocasio-Met Cortez’s Gala stunt of wearing a white gown with the words “tax the rich” printed in red, the message is out in the open. It’s only a matter of time until governments take action.
– Janvi Gupta
Picture: Representational (Credits – ibtimes.co.in / IANS)