India should take cues from Piketty on enlarging its tax mop-up
Subscribe to enjoy similar stories. When it comes to budgeting, there are some revenue streams that are linked with broader growth in the economy. These include the goods and services tax (GST), which is a consumption-based tax, corporate tax, which is linked to the profitability of companies, and customs duty, which is driven by imports.
The actual flows are contingent on how these elements perform and are thus beyond the government’s control. True, better compliance has been witnessed in the past, thanks to better systems being put in place. But beyond a point, such flows tend to plateau out.
Therefore, the government needs to look at new avenues of taxation within this framework. Surcharges and cesses, levies that have often been used, could be applied to these new areas. Three ideas, borrowed partly from Thomas Piketty’s dogma of taxing the rich more, can be pursued.
Two of them follow that logic, while the third would leverage the success of the Unified Payments Interface (UPI) to garner revenue. The first idea is in the realm of luxury. Today, it is well accepted that while there may be rural or urban distress, the rich are never affected by economic conditions.
So, can we think of a luxury tax or surcharge that will not burden the taxpayer nor reduce demand for the product or service taxed? To be fair to the affluent, income and wealth are generated with progressive taxes paid along the way. Hence, it would not be right to tax the same directly again. But all new purchases can be brought under a ‘luxury surcharge,’ which may be analogous to the income tax surcharge on incomes above ₹50 lakh per annum.
Read more on livemint.com
