The Union Budget is only a few days away and speculations that the Income Tax will be reduced is high. As the speculations are heating up, just a few days back Oxfam released the Wealth Inequality Report 2024 – Takers, not Makers – bringing out some startling findings.
The report says – 204 new billionaires were minted in 2024, nearly four every week.
60% of billionaire wealth is not earned, but derived from inheritance, monopoly power or crony connections, as Oxfam argues that “extreme billionaire wealth is largely unmerited.” The richest 1% in the Global North extracted $30 million an hour from the Global South through the financial system in 2023. It also predicts that there will be at least five trillionaires a decade from now.
When it comes to social spending, resource crunch is cited as a reason for lower allocations. India spends only around 4.4% of its GDP on education, while many argue a minimum of 6% is required. Similarly, it allocates approximately 1.5% of its GDP to healthcare, far below the global average of 3.5%.
Economists have argued that in India a “2% wealth tax on the top 1% of the population, together with a 33% inheritance tax on the wealth they bequeath every year to their progeny, could finance an increase in government expenditure to the tune of 10% of GDP.”
While there has always been a lot of clamour about ‘tax-paying citizens’ one is deliberately ignoring the fact that everybody is paying taxes. In GST, with the income inequality gap widening, the poor and ordinary citizens are paying the same indirect tax as the rich. Many luxury items are taxed at a similar rate to food items.
Discussions around reduction in income tax in the upcoming budget need to be looked at in this context.
-Team CFA