Inheritance tax may be reintroduced in
India by Centre soon; How it can impact you
To boost tax revenue,
the government is planning to reintroduce inheritance tax in India, which may be
introduced in the coming Budget.
Developed countries like the UK and the US have high inheritance
tax and that is effective there because they have a very strong social security
system in place.
Some have proposed that India
needs to address increasing inequality by increasing its tax-to-GDP (gross
domestic product) ratio.
How a “low
tax to GDP ratio” affects India?
As per 2015 data, India has
low Tax or Revenue to GDP ratio at around 18%. It is substantially low in
comparison to US (27%), UK (39%), , France(45%), Germany (41%)and BRICS
constituents viz., Brazil (34%), Russia (20%), China(22%), South Africa(27%).
Growth not inclusive. Many
poor people coexisting with super rich.
Poor
revenue to GDP Ratio while GDP is on the rise, will impacts India as under :
1)
Rise of social inequalities - The economy will suffer from wide gap between per
capita income of rich and poor.
2)
Rise in Interest burden - The funding for Public works programme would be done
more out of borrowings. This will increase interest burden. Interest payment
means lesser appropriation of funds for Capital Asset building.
3)
Inflation - Lesser contribution from tax payers means generating money supply
partly through printing of currency.
4)
Higher Interest Rates - Inflation will put pressure on interest rates.
5)
Higher participation of MNCs and investment of foreign funds in infrastructure,
Power generation, technology, etc . Domestic companies will have to face tough
competition from MNCs.
6)
Rupee will not strengthen in medium term
7)
Pressure to contain Fiscal Deficit & Current
Deficit.
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