Revenue-hungry finmin mulls taxing dividends of super-rich

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SummaryLeft with few options to increase revenue productivity in an economy that has slowed down, the finance ministry is weighing various options that won’t directly hit the common man, but would accelerate revenues from high net worth individuals.

tax expert.

“Taxing at the hands of individuals is against the concept of dividend distribution tax. DDT was introduced to avoid hassles of collections from individuals,” said PricewaterhouseCoopers executive director Rahul Garg.

While the proposal raises concerns of double taxation, taxing dividend above a high threshold would mean it is in line with the idea of progressive taxation. Of 32.4 million taxpayers in the country, some 400,000 reporting taxable income higher than R20 lakh paid over R93,000 crore as income tax in 2011-12. In other words, 1.3% of the taxpayer pool accounted for 63% of the total personal income tax collection of R1.5 lakh crore in the year. Currently, the highest income tax rate of 30% is applied on taxable income of R10 lakh-plus, while the top income tax rate is higher in countries like Australia, Sweden, the UK, Switzerland, Germany and Denmark.

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