Should Rich Be Taxed Higher

Topics: Tax, Taxation, Progressive tax Pages: 3 (1072 words) Published: August 22, 2013
Has Finance Minister P Chidambaram set the cat among pigeons? Many ‘super rich’ may think in the affirmative with his recent statement overseas. After assuring foreign investors that the tax rates would remain stable, in an interview to a TV channel in Singapore he stated: “there is an argument that when the Government requires more resources, the very rich should willingly pay a little more.” In the same breath, Chidambaram, however, added that it was “simply an argument” that he had heard and was merely repeating it! Apparently, one doesn’t have to look far from where this “argument” is emanating. There is an ongoing debate that there is an imperative need to increase the country’s tax to GDP ratio and reduce the fiscal deficit in the coming Budget. And, keeping this in view, chairman of the Prime Minister’s Economic Advisory Council, Dr. C Rangarajan, recently proposed that the super rich should be made to pay higher taxes. He has suggested imposing a surcharge, if not creating a separate higher income tax slab, on the super rich. There has been some controversy regarding the proposal as certain sections believe that in case of such a tax, the additional revenue generated would not be enough while this may also encourage the rich to further evade taxes. However, it is generally agreed that taxing someone who is earning at a much higher rate is quite justifiable in terms of equity and in accordance with the principles of progressive taxation. A person earning say Rs 25 lakhs and the other Rs 60 lakhs cannot be put in the same taxation bracket. It may also be mentioned that taxing the super rich will definitely send a positive signal about the intentions of the Government and increase revenue collection to some extent, if not the desired levels. There have been suggestions that the Government can go further and introduce an inheritance tax which would shrink inherited wealth and may become an obstacle for corporate houses to work hard and expand their business....
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