India Budget 2019: The estate or wealth tax was abolished in Budget 2015 as it failed to become a profitable enterprise.
India Budget 2019: While Nirmala Sithraman has shunned the wealth tax in her maiden budget, the same would have garnered lakhs of crores to Indian government even if merely 1% of it were levied from India’s super-rich, says a former Jawaharlal Nehru University professor. “Even a 1 per cent wealth tax on these billionaires would have fetched Rs 5.6 lakh crore,” Prabhat Patnaik, a former economics professor at JNU, New Delhi, wrote in The Indian Express. Couple this with an inheritance tax and that will fetch even more, he added. It was widely expected that Nirmala Sitharaman will propose a wealth tax and inheritance tax in the Union Budget 2019, reinstating the decades-old tax. However, the finance minister instead proposed an additional surcharge of 3% to those earning Rs 2-5 crore and 7% to those earning above Rs 5 crore.
From the inheritance tax, an additional Rs 9.3 lakh crore could have been raised, even if assuming that only “5% of billionaires’ wealth gets passed on every year,” Patnaik wrote in the national daily, adding that Rs 15 lakh crore raised by both inheritance and wealth tax would have been sufficient for financing elementary welfare state. Moreover, this kind of additional revenues could have guaranteed, according to Patnaik, right to food, right to employment, quality education up to secondary level, right to quality healthcare through government-run National Health Service and a right to old age pension of Rs 2,000 per month which is currently at Rs 200 per month.
Why was wealth tax abolished?
The estate or wealth tax was abolished in Budget 2015 as it failed to become a profitable enterprise. The then Finance Minister Arun Jaitley had replaced the wealth tax with surcharge stating “should a tax which leads to the high cost of collection and a low yield be continued or should it be replaced with a low cost and higher yield tax?” he asked. Therefore, the wealth tax was replaced by an additional surcharge of 2% on income above Rs 1 crore.