Superpower's weak institutions

The money raised through a higher capital gains tax will hardly add much to the Rs 24.4 trillion of revenue receipts and Rs 41.9 trillion of spending estimated for 2023-24

Debashis Basu
taxes, tax, taxing, audit

Last week, Bloomberg reported India was preparing to overhaul its direct tax laws to help “Prime Minister Narendra Modi reduce widening income inequality”. Already, in the recent Budget, the government decided to tax debt funds at the normal income-tax rate. When the article appeared, there was consternation among a few, leading the government to backtrack immediately. But the genie was out of the bottle. The government had prepared us. It is now a matter of time before long that capital gains tax rates will be “rationalised”. But will taxing the rich reduce inequality when the rich are getting richer not due to tax advantages but due to mind-boggling corruption, opaque rules, regulatory failures, weak institutions, and gaming the system at all levels?
It could well be we need to tinker with tax rates but that should be the least of our priorities if we want to fix income inequality. In a parliamentary question on December 21, the
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of or the Business Standard newspaper

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First Published: Apr 23 2023 | 10:25 PM IST

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