{"id":41444,"date":"2024-07-07T11:42:28","date_gmt":"2024-07-07T06:12:28","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=41444"},"modified":"2025-04-30T20:00:50","modified_gmt":"2025-04-30T14:30:50","slug":"tax-on-ultra-high-net-worth-individuals","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/tax-on-ultra-high-net-worth-individuals\/","title":{"rendered":"Tax on Ultra High Net Worth Individuals"},"content":{"rendered":"<h2><strong>What\u2019s in today\u2019s article?<\/strong><\/h2>\n<ul>\n<li>Why in News?<\/li>\n<li>What is a Wealth Tax?<\/li>\n<li>Analysing the Proposal to Tax Ultra High Net Worth Individuals<\/li>\n<\/ul>\n<h2><strong>Why in News?<\/strong><\/h2>\n<ul>\n<li>The Global Tax Evasion Report 2024 &#8211; a report commissioned by Brazil\u2019s G-20 presidency, was recently released.<\/li>\n<li>In this report,French economist Gabriel Zucman has recommended an annual 2% tax on individuals holding wealth exceeding $1 billion.<\/li>\n<\/ul>\n<h2><strong>What is a Wealth Tax?<\/strong><\/h2>\n<ul>\n<li><strong>Meaning: <\/strong>A wealth tax is a tax based on the market value of assets owned by a taxpayer.<\/li>\n<li><strong>Wealth tax in India: <\/strong>It was governed by the Wealth Tax Act, 1957, however, it has been ruled out with effect from 1st April 2016.<\/li>\n<li><strong>Pros and Cons of a Wealth tax<\/strong><\/li>\n<li><strong>Proponents:<\/strong>\n<ul>\n<li>This type of tax is more equitable than an income tax alone, particularly in societies with significant wealth disparity.<\/li>\n<li>It promotes fairness and equality by taking into account taxpayers\u2019 overall economic status, and their ability to pay tax.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Critics:<\/strong>\n<ul>\n<li>It discourages the accumulation of wealth, which drives economic growth.<\/li>\n<li><strong>Administration and enforcement <\/strong>of a wealth tax present challenges, as determining the fair market value of assets leads to valuation disputes between taxpayers and tax authorities.<\/li>\n<li>Uncertainty about valuation also could tempt some wealthy individuals to try <strong>tax evasion.<\/strong><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><strong>Analysing the Proposal to Tax Ultra High Net Worth Individuals:<\/strong><\/h2>\n<ul>\n<li><strong>Recommendation:<\/strong>\n<ul>\n<li>Individuals possessing more than $1 billion in total wealth (assets, equity shares, etc) would be required to pay a minimum (2% of their wealth) amount of tax annually.<\/li>\n<li>This would be the basic requirement to safeguard global tax progressivity and could potentially raise $200-$250 billion a year globally from about 3,000 individuals.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Rationale for such a tax:<\/strong>\n<ul>\n<li>The wealth of the top 0.0001% households has surged more than fourfold since the mid-1980s.<\/li>\n<li>They owned 3% of world GDP in wealth, which rose to 13% in 2024.<\/li>\n<li>However, the contemporary tax systems worldwide are not effectively taxing the wealthiest individuals (effective tax rates are between 0% and 0.5% of their wealth).<\/li>\n<li>As a result, ultra-high-net-worth individuals tend to pay less in tax relative to their income.<\/li>\n<li>This in turn\n<ul>\n<li><strong>Deprives governments of substantial tax revenues<\/strong>,<\/li>\n<li>Contributes to <strong>concentrating the gains of globalisation into relatively few hand<\/strong>s, and<\/li>\n<li>Undermines the social sustainability of economic globalisation.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><strong>Significance of this proposal:<\/strong>\n<ul>\n<li><strong>Progressive taxation<\/strong> is a key pillar of democratic societies that helps strengthen social cohesion and trust in governments to work for the common good.<\/li>\n<li>Better tax revenues are also crucial to meet the investments required to address the <strong>climate crisis.<\/strong><\/li>\n<\/ul>\n<\/li>\n<li><strong>Impact of this proposal:<\/strong>\n<ul>\n<li>Finance Ministers of the G-20 group are set to meet in Rio de Janeiro.<\/li>\n<li>The proposal will serve as the starting point for a global discussion on ensuring under-taxed billionaires are made to contribute more to <strong>reduce inequality worldwide<\/strong>.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Supporters and opposers of the proposal:<\/strong>\n<ul>\n<li><strong>Supporters:<\/strong> Brazil, France, Spain, Colombia, Belgium, the African Union and South Africa have backed the idea.<\/li>\n<li><strong>Opposers: <\/strong>The U.S. Treasury Secretary Janet Yellen has opposed a global wealth levy.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Relevance of the proposal for India:<\/strong>\n<ul>\n<li>According to a study titled \u2018Income and Wealth Inequality in India,\u2019 India has seen a disproportionately sharper increase in wealth at the top of the pyramid between 2014-2023.<\/li>\n<li><strong>Top 1% income and wealth shares<\/strong> (22.6% and 40.1%) are at their highest historical levels and India\u2019s top 1% income share is among the very highest in the world.<\/li>\n<li>Therefore, <strong>a \u2018super tax\u2019 on the very wealthy<\/strong> might be a good idea for fighting the growing inequalities and providing additional fiscal space for the Indian government.<\/li>\n<li>A mere 2% tax on the total net worth of the 162 wealthiest Indian families will generate revenue equivalent to 0.5% of the country&#8217;s GDP.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<figure class=\"media\">\n<div data-oembed-url=\"https:\/\/www.youtube.com\/watch?v=VD1j50G_AMg\">\n<div><iframe src=\"https:\/\/www.youtube.com\/embed\/VD1j50G_AMg\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/div>\n<\/div>\n<\/figure>\n<hr \/>\n<h3><strong>Q.1. What is an Inheritance Tax?<\/strong><\/h3>\n<p>Inheritance\/ estate tax is a tax levied on the total value of money and property of a deceased person before it is distributed to their legal heirs.<\/p>\n<h3><strong>Q.2. Which constitutional provisions prevent concentration of wealth in India?<\/strong><\/h3>\n<p>Article 39(c) of the DPSP specifies that the operation of the economic system does not result in the concentration of wealth and means of production to the disadvantage of the common people.<\/p>\n<p><strong>Source: <\/strong><a href=\"https:\/\/www.thehindu.com\/business\/Economy\/can-the-uber-rich-worldwide-be-taxed-better\/article68375785.ece\" target=\"_blank\" rel=\"nofollow noopener\"><u>Can the uber-rich worldwide be taxed better? | Explained<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>According to the Global Tax Evasion Report 2024, an annual 2% tax on individuals holding wealth exceeding $1 billion would help in fighting the growing inequalities<\/p>\n","protected":false},"author":5,"featured_media":41445,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-41444","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/41444","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=41444"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/41444\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/41445"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=41444"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=41444"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=41444"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}