Billionaire tax: IMF’s Gita Gopinath supports ‘progressive taxation’, flags wealth tax complexities

International Monetary Fund’s (IMF) first deputy managing director Gita Gopinath in an interview with TOI said that the IMF is in favour of a progressive tax structure.

When asked “Can billionaire tax and wealth tax be effective in dealing with inequality?” Gopinath said, “We think better implementation of what’s there in terms of capital income taxes, property taxes can be encoded into the tax system properly.”

“With wealth taxes, there are some additional complications. For example, for a lot of people, wealth is basically their home. There are implementation issues associated with it, but if you can get capital income tax, well, well done,” she added.

Earlier this year, a study co-authored by economist Thomas Piketty suggested that India should impose wealth tax on the ultra-rich to tackle wealth inequality and create fiscal space for investments in the social sector.

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The paper said imposing 2% annual tax on net wealth exceeding Rs 10 crore and a 33% inheritance tax on estates exceeding Rs 10 crore tax in valuation. This could generate revenue amounting to 2.73% of gross domestic product (GDP), it suggested.As per the paper, 0.04% of the adult population holds more than a quarter of the total wealth, and imposing this tax would leave 99.96% of the adults unaffected by the tax.”Progressive wealth taxation, effective redistribution, and broad-based social sector investments are urgently needed to build an equitable and prosperous India,” Anmol Somanchi, one of the four authors of the report, said.

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The report followed an earlier paper released by the World Inequality Lab, which had said inequality in India has widened since the early 2000s with the income and wealth share of the top 1% of the population rising to 22.6% and 40.1%, respectively, in 2022-23.

The income share of India’s top 1% is among the highest in the world, topping even South Africa, Brazil and the US, it said.

In addition to this, Sam Pitroda, a senior Congress leader and chairman of Indian Overseas Congress, had backed inheritance tax and called for a debate on wealth redistribution in the country. The Congress party had soon distanced itself from Pitroda’s comment. Pitroda, subsequently, stepped down from the post of chairman.

India had experimented with taxing the rich in the form of estate tax and wealth tax and a gift tax, which were later abolished due to low collections and high administrative cost.