THURSDAY, MAY 16, 2024
India Overseas Congress president Sam Pitroda’s controversial remarks on inheritance tax have not only sparked debates and sharp criticisms but have landed the Congress in trouble. Bitter political foes Congress and the BJP have clashed over the statements, with the former clarifying and asserting that they did not represent the party’s official stance but were Pitroda's statements and accused the BJP of trying to take political mileage of the issue and divert attention during elections.
The Congress added that Pitroda was entitled to express his personal opinion but stated they should not be sensationalised.
The controversy surrounding the inheritance tax erupted when Sam Pitroda advocated inheritance tax during a discussion on wealth distribution and supported it by explaining how it is implemented in America. Pitroda said that there is an inheritance tax in America and if someone has an estate of $100 million, upon death, 45 percent of the estate goes to his children and 55 percent goes to the government.
It simply means that half of the wealth you have created during your lifetime will have to be left to the public after your death. He said that this is a very special law. There is no such law in India. Clarifying his statement, Sam Pitroda sought to downplay the issue saying he had only cited inheritance tax in US as an example
and added that it had nothing to do with the policy of any party including the Congress.
“Who has recommended this tax in India? Why is the BJP and also the media scared? I mentioned US inheritance tax in the US only as an example in my normal conversation on TV. Can I not mention facts? I said these are the kind of issues people will discuss on TV and debate. This has nothing to do with the policy of any party including Congress,” Pitroda said in his post on X.
Originally, Pitroda's statement was intended to address the issue of unequal distribution of wealth, which the Congress has brought up in its manifesto. The Congress's argument is that the roots of inequality are rooted in fundamental challenges such as unemployment, stagnant wages, weak investment, an unfavourable environment for small entrepreneurs and a lopsided tax system. In the book 'Income and Wealth Inequality in India' by Nitin Kumar Bharti, Lucas Chancell, Thomas Piketty and Anmol Somanchi, the authors claim that today’s India is more unequal than that of during British rule.
India's top 1 percent today owns 40 percent of the country's wealth. According to Oxfam, 21 billionaires own as much wealth as 70 crore Indians. Inequality has increased in the last ten years. One of the bases of huge inequality is the widespread scarcity of jobs. Unemployment is a major driver of inequality. Economist Santosh Mehrotra, in a report using PLFS data, says the number of unemployed has increased from 1 crore (2012) to 4 crore (2022).
According to the 'State of Working India Report 2023', 42 percent of graduates under the age of 25 are unemployed. The presence of women in the labour market is extremely low. Perhaps one of the most controversial issues is India's tax system. During BJP's tenure, the share of corporate tax decreased and the income tax paid by a large section of the middle class increased. Worst of all, indirect tax collection, of which GST is a major part, even though it is now the largest tax collection, only sixty-four percent of GST is paid by the bottom half of Indian society.
Globally, MSMEs create the most jobs. However, the Modi government's policies have consistently favoured corporate allies through tax cuts, loan waivers and favourable agreements and regulations, ignoring the informal economy. Experts are of the view that demonetisation and the implementation of GST have caused huge losses to the MSME sector.
While big companies got a tax bonanza of Rs 1.5 trillion as part of the pre-pandemic stimulus, there was no such incentive for MSMEs. Without more investment, job creation will suffer. However, the fact remains that the average investment rate of 28.7 percent under the Modi government is much lower than the UPA's rate of 33.4 percent.
According to the Henley Global Citizens report, the uncertain climate of the BJP government is a major deterrent to investment, with 8,000 crorepatis leaving the country every year. According to the Congress, the Modi government waived off more than Rs 16 lakh crore of corporate loans. But the Congress has claimed that the party will sympathetically consider some sections of the society i.e. farmers, women, workers, youth and the poor first.
Congress claims that it has prepared its manifesto considering all these issues of economic inequality. Of course, no matter which government comes to power, it does not necessarily fulfil 100 percent of the promises made in the manifesto. It is indeed the job of any government to consider the root problem and take policy decisions considering the far-reaching consequences to eliminate it permanently. But most of the parties use freebies for votes in their manifestos. Like, free electricity, free travel, free education, marriage assistance, etc, and then once in power, the state exchequer is burdened to fulfil these promises. This obviously leaves less money for other necessary infrastructural development and as a result imbalance of development is created. So irrespective of the party, if we want to eliminate economic inequality, we have to think strategically. Temporary measures will not help to achieve anything.
