New Delhi, May 3 -- Election season stirred up yet another controversy. The inheritance tax or "death tax" as it was notoriously known waded into political debates after Sam Pitroda, chairperson of Indian Overseas Congress, referred to it. And lo and behold, the gates of political mudslinging were thrown wide open as BJP accused the Congress of planning to impose 55 per cent inheritance tax if it comes to power. That the Congress has no such plans, and that over the years, leaders from both the parties have batted for it was lost in the hubbub. What remained were elements such as the misinformed students of a Greater Noida based private university who went viral for their half-baked, WhatsApp university fuelled ignorance. It's better to give away wealth than to leave it to brainwashed successors like these. But that's another story.
The history of the inheritance tax is interesting and its general vision can't be viewed through the narrow prism of self-growth. We live in an unequal world and if you haven't noticed, it's a world where increasingly, the rich get richer and the poor get poorer. It's an unpredictable world where viruses and international wars take turns to cause disruption. We live in times when the proverbial chickens (of destroying nature) have finally come home to roost (through extreme events of climate change). This world is getting upended by Artificial Intelligence (AI) as we speak, with millions fearful of potential future unemployment. In such a world that lacks security, is it a crime to discuss wealth redistribution?
When a person with a sizable estate passes away, inheritance tax would be levied while transferring the estate to the heirs. The total value of the assets would be calculated including adjustment of debt and liabilities. If you look at the legacy of the inheritance tax, it's amply clear that many luminaries of the Indian democracy have made a case for it - P Chidambaram, Arun Jaitley, and more recently Jayant Sinha. Until about forty years ago, the inheritance tax or estate duty was in effect, and was abolished in 1985. Brought into effect in 1953, the Estate Duty Act, was envisioned as a means to promote economic equality. As per news reports, due to draconian tax rates, differing valuation assessment rules, high costs of collection, tax evasion via 'benami' property transactions, and continuous political opposition, the Estate Duty was ultimately scrapped.
While such a tax is meant to affect only the super-rich, its meaning and implementation remained complex with ample loopholes for skirting it. Today, an implementation of inheritance tax would likely be far more effective. With the Digital India push leading to digitisation of all documents including that of land and property, and impressive income tax and goods and services tax (GST) collection, our tax collectors are more experienced and better equipped today. Globally, the inheritance tax is still prevalent in some states of the US (40 per cent), Japan (55 per cent), France (45 per cent), United Kingdom (40 per cent), Spain (34 per cent), Ireland (33 per cent), Germany (30 per cent), Belgium (30 per cent), and South Korea (50 per cent), among others. Couple of years ago, the Samsung family in South Korea made headlines as they became liable to pay USD 10.3 billion as inheritance tax after the death of group chairperson, Lee Kun-hee. The family sold shares worth USD 2 billion in January this year to pay off the burden of the inheritance tax.
Indian billionaire N R Narayan Murthy's five-month-old grandson is already a millionaire with a gift of 15 lakh Infosys shares valued at about Rs 210 crore. While Mr Murthy asks the younger generation to clock 70-hour weeks, and I'm sure his grandson may also do so when he comes of age.but what a fantastic head start this toddler already has in life! If you think altruistically.how much money do we really need to live an affluent life? How much would your second and third generations need? As of April 2, 2024, Forbes reports that the number of billionaires in the world are 2,781,141 more than last year, and they are worth USD 14.2 trillion!
As per the World Inequality Lab report, 22.6 per cent of our nation's income went to only the top 1 per cent (in 2022-23); the highest level recorded since the data series started in 1922. A forced inheritance tax could strongly persuade more of the super rich to contribute to social causes, poverty alleviation, clinical research and development, innovation, climate action - the list is endless as are their monies.
The writer is an author and media entrepreneur. Views expressed are personal
Published by HT Digital Content Services with permission from Millennium Post.