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THE obnoxious speech of Narendra Modi on April 21 at Banswara, Rajasthan was notable for its vicious attack on Muslims and demonising any redistribution policy as a handing over of the gold and property of Hindus to the “infiltrators”. The bigotry displayed in this speech has understandably attracted widespread condemnation. But there is another aspect of the speech that exposes the extreme rightwing view of Modi and the BJP which results in the visceral hatred for any proposal for redistribution of wealth and incomes to tackle the high degree of inequality that exists in India.
Modi and the BJP used some remarks by Sam Pitroda, a Congress supporter, who talked about the necessity to consider an inheritance tax in India on the lines of such a tax that exists in the US. It is this reference to an inheritance tax which drew the ire of Modi and the rightwing ruling party. It is the policies pursued by the Modi government in the last decade with its tax concessions for the corporates, abolition of wealth tax, lowering the rate of income tax for the highest bracket and favourable treatment for its crony capitalists that have exacerbated inequality and made India one of the most unequal societies in the world.
There is a wealth of data which shows the existence of extreme inequality in India. According to the World Inequality Lab, the top 10 per cent of the population of the country have a share of 65 per cent of wealth and 57 per cent of incomes in 2022-23. As per the Oxfam report, the top 1 per cent of the population owns 40 per cent of the country’s wealth. In contrast, the bottom 60 per cent own just 4.7 per cent of the wealth. This becomes more skewed if the black money held by the top 1 per cent is taken into account.
The Constitution of India recognising the social reality that the vast mass of people, especially the socially oppressed sections are deprived of material resources and are victims of an unjust social and economic order, set out certain guidelines in the Directive Principles of State policy in part IV of the Constitution. Clause 39(b) provides, “that the ownership and control of material resources of the country are so distributed to subserve the common good. And sub clause (c) directs that “the operation of the economic system does not result in the concentration of wealth and the means of production to the common detriment”.
The neoliberal policies instituted for the past three decades have worked contrary to these Directive Principles. There has been a concentration of wealth in the hands of a narrow stratum of billionaires and 90 per cent of the people are deprived of the material resources required to earn a decent livelihood and lead a better life.
Neoliberalism has led to inequality rising globally. In this sea of inequality, India has sunk to the lowest depths. Once again there are heated debates going around on how to address the problem of inequality within countries and between the rich industrialised countries and the developing countries.
One of the key steps to address inequality and to make more resources available for State intervention to ameliorate poverty is to have a taxation policy designed to help redistribution. Wealth tax (which means higher taxation on the super-rich), inheritance tax and gift tax are some of the measures which are being seriously considered.
From the beginning in advanced capitalist countries, the principle that inherited wealth should be taxed and the State take a part of this wealth for public purposes, has been an established one. There are two types of tax on inherited wealth – estate tax and inheritance tax. The difference between the two being that in the case of estate tax, the deceased person’s estate is taxed before it is given to those entitled to it. In the case of inheritance tax, the inheritors of the wealth, whether spouse or family members are taxed on the amount of wealth they are bequeathed. In 19 countries of the European Union, there are inheritance, gift or estate taxes. For instance, the inheritance tax in UK is up to 40 per cent, in France, 45 per cent and Netherlands up to 40 per cent. Outside the EU, Japan has inheritance tax up to 55 per cent and in the United States various states levy inherence tax between 20-55 per cent. In India, inheritance tax was done away with in 1985 and wealth tax in 2015. The rationale given was that there were meagre revenues realised through these taxes and they involved more costs in administering these taxes.
With wealth of some Indians galloping to obscene levels, it is only just and equitable that their wealth be taxed. Jayati Ghosh who has cochaired an Independent Commission for the Reform of International Corporate Taxation has suggested that the 187 dollar billionaires who figure in the Hurun Global Billionaires List in 2023 be levied a wealth tax. This will mean that 99.99 per cent of the population will not be affected. Even a 4 per cent tax on their wealth would realise substantial revenues which can be used for public health and education.
Similarly, the inheritance tax would be levied only on the top tiers of wealth to be inherited. There will be no inheritance tax on small and medium levels of property and assets. It would apply, say at the level of Rs 100 crore and above and that too in a graded fashion. So Modi’s reference to mangalsutras and other properties being appropriated was just scare-mongering.
The Modi government, which has pampered the billionaires and big corporates by reducing taxes on them and giving all manner of handouts including write-off of loans to corporates, considers any proposals to levy fresh taxes or increased taxation on the rich to be anathema. Modi termed it as “urban naxal” thinking. This is why talk of an inheritance tax has led to a vicious attack and communalising the proposal. This is in keeping with the communal-corporate character of the Modi regime.
The Congress party was put on the defensive on redistribution polices. It needn’t be so as the goal of economic and social justice set out in its manifesto requires a set of polices which aims to reduce inequalities and ensure social equity. The CPI(M) has made its position clear on the matter by advocating in the manifesto a set of taxation policies which include wealth tax for the super-rich, an inheritance tax and increasing tax on corporate profits. These are essential steps if the Modi raj for the big corporates and the super-rich is to be done away with.
(May 1, 2024)
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