Inheritance Tax Will Lead To Economic Chaos In India: Economist Gautam Sen

Gautam Sen said that around 2.4 per cent of people pay taxes in India, of which not more than 1.2 million have personal assets

Inheritance Tax In India ( Image Source :Getty )

Economist Gautam Sen said that the notion of an inheritance tax is unrealistic and labelled Congress leader Rahul Gandhi's suggestion of a "wealth survey" as impractical. While speaking with news agency ANI, Sen expressed concerns that conducting surveys of all households and businesses for wealth redistribution would result in economic turmoil. His remarks came in response to Rahul Gandhi's comments on "wealth redistribution" and the Congress party's election pledge of a socio-economic census, which sparked significant political debate.

Gautam Sen said that around 2.4 per cent of people pay taxes in India, of which not more than 1.2 million have personal assets. “In order for them to be forced to surrender, you have to close their businesses down. That means the following year, there will be economic chaos,” he said.

“The very rich, that is, the Ambanis, the Adanis, the Mahindras, the Tatas, and I presume not more than 500 or less of the very rich, the billionaire class, they will migrate from India to Dubai. Most Indian millionaires who have been leaving the country have gone to Dubai, 70 per cent in fact, because Dubai has no income tax. And they will re-register their businesses in UAE, which means India will only be able to collect corporate taxes from them because their business will remain in India,” he said.

“So there will be a huge loss of wealth to India. Now, if you think about other countries, Sweden used to have a very significant inheritance tax. And Sweden is one of the highest tax countries in the world in history. But you know, Sweden removed the inheritance tax because many of the rich were fleeing. For example, the owner of IKEA had migrated out of Sweden.”

“And what they found after removing inheritance tax, that a lot of the wealth came back, economic growth improved, and tax collecting also improved. So, with those extra taxes, they could redistribute to the less well-off in Sweden. So, in fact, not having an inheritance tax or wealth tax was beneficial to ordinary Sweden. Now, in India, if you inflict this amount of chaos, you must bear in mind you can’t do it to agricultural land”, the economist added.

“Whoever thought of this idea was not thinking very realistically, what we have now is a very vast improvement on what we used to have before — we have this incredible combination, which has almost never been achieved, of combining wealth creation through investment, infrastructure with redistribution,” Sen said.

Previously, Congress leader Sam Pitroda had advocated for India to consider exploring inheritance laws, drawing parallels with the United States. Responding to Pitroda's suggestion, the economist clarified, "First of all, there is no inheritance tax in the US. They don't have an inheritance tax, it is called estate duty and gift tax. In the US, it is paid by 0.14 per cent of the deceased till 2022 - of 2.5 million deceased, only 0.14 per cent, ie 4,000 people in the entire US, are subject to Estate Duty."