Progressive property taxes and the need for strong tax administration

In the second speech of the series, NS Bishwanathan, former deputy governor of RBI, said that tax policies could change the distribution of income and wealth for the benefit of the lower castes. .

In his speech this evening on ‘Review of Tax Policy’ as part of the Center for Public Policy’s ‘Inequality Dialogue’, NS Bishwanathan, former Deputy Governor of RBI and Senior Fellow of IIM Bangalore, emphasized the importance of this. To understand the different levels of inequality in order to realize the effectiveness of the tax policy followed in different parts of the world.

He explained that the measures used to assess inequality include the ratio of income to the top 10 percent of the population and the proportion of income to the bottom 50 percent of the population, as well as the share of wealth. Top 10 percent of the population compared to the bottom 50 percent of the population. Analysis of how these systems spread globally between different regions and nations of the world shows that globally, although inequality is undoubtedly much greater, it varies from country to country and region to region and different countries and regions exhibit more inequality than global. On average it should also be understood, Professor Bishwanathan explained that where inequality is acute in poor countries, it lives at the level of subsistence for a large portion of the population.

Globally, however, corporate income tax rates are moving south. The low rate of corporate income tax as opposed to personal income tax results in individuals corporatizing their activities to benefit from it. Also, the current global competitive corporate tax system enables large corporates to transfer profits to lower tax jurisdictions. “There is, therefore, a move towards a global minimum tax that implies that a multinational country can levy a profit from another jurisdiction to the extent of the difference between the corporate tax and the agreed minimum tax rate imposed by the host jurisdiction. The effectiveness of such a system is, to a certain extent, the effectiveness of the minimum global tax that agrees, “he explained, adding that, for example, with a minimum tax rate of 15 per cent, India could receive an additional tax of 0.5 billion euros in revenue and a minimum tax rate. At 25 percent, that would increase to 1.4 billion euros.

Moving on to the 2022 budget summary, Professor Bishwanathan says one has to work to increase the GDP to tax ratio and the share of direct taxes. The retrograde effects of a higher proportion of indirect taxes are addressed by directing public spending towards activities that contribute to the socio-economic well-being of lower economic groups.

In the long run, he suggested:

  • Uniformity over a global minimum corporate tax to keep a race down.
  • Progressive property tax
  • Notice a definite change in the distribution of post-tax revenue through revenue policy
  • Strong tax administration.

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