A study pitches for reintroduction of wealth tax to address inequality

In order to address the rising inequality in the country particularly amid the COVID-19 pandemic, a study has pitched for re-introduction of wealth and inheritance tax and provide incentives on them for charitable donations.

The study carried out jointly by Ashoka University and think tank Centre for Budget and Governance Accountability (CBGA) has observed that absence of wealth and inheritance tax is regarded as one of the reasons for the lower level of philanthropic giving.

“Reintroduction of these taxes, along with incentives on them for philanthropic giving, will not only result in additional tax revenue for the government, it will also increase the resources of the charitable sector,” the report stated adding that during the COVID-19 pandemic, many countries changed tax incentives to encourage donations.

The report noted that the absence of taxes that affect the wealthy relatively more, such as wealth tax and inheritance tax, weakens the influence of incentives on donation.

“A serious re-examination of our tax incentive regime could not be more urgently required. Even just making data more accessible could unleash a flood of generosity from Indians across the country,” said Ingrid Srinath, director CSIP at Ashoka University.

The study noted that in India, tax incentives for donations, especially the 80G scheme, have remained unchanged over the last four decades, except for the addition of certain government entities and funds to the scheme. The tax incentive structure for giving to the charitable sector seems to have become less generous over time and has hence reduced the benefit that donors can derive, it said.

“India needs a quantum increase in domestic philanthropic funding directed towards upliftment of the most marginalised; the latter will depend on the extent to which our tax system and regulatory framework are made more enabling for civil society interventions,” said Subrat Das, executive director, Centre for Budget and Governance Accountability (CBGA).



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