Ahead of Union Budget for fiscal year 2013-14, the government is toying with the idea of additional taxation for India's super-rich. Finance Minister P. Chidambaram earlier this month said that the government should consider taxing the very rich more. "We should consider the argument whether the very rich should be asked to pay a little more on some occasions," he said.
With a ballooning fiscal deficit, the government is looking for ways to push up its revenue and changes in the structure of taxation may just be one such step. While it has clear support from the chairman of Economic Advisory Committee to the Prime Minister, Dr C. Rangarajan, and other economists, India Inc. has rallied against any such move.
Here is a look at what India's super-rich said about taxing the super-rich:
Azim Premji, chairman, Wirpo: It sounds like the right thing to do politically, but I don't actually know if it will come up. The same thing has come up on estate duties. Most parts of the world have estate duties. Is it the right thing to do or not a right thing to do?
The end result should be that you get into very complex tax games to be able to mitigate it, which has happened in most parts of the world. The wealth has remained. It's got re-gamed in terms of very sophisticated tax structures, and there is not a country where those tax structures have not happened. So you get into more, in terms of how you handle wealth, whereas to tax rich at a higher slab rate is a little more straightforward.
In terms of (taxing) the super-rich, I think there is legitimacy in a country as poor as ours.
Naina Lal Kidwai, country head-India and director-Asia-Pacific, HSBC: A higher rate of tax on the high income group is uncalled for... it will discourage entrepreneurship. Additionally, the threshold for paying income tax at 30 per cent should be raised from Rs 10 lakh to Rs 20 lakh.
Adi Godrej, president of CII and chairman of Godrej group: We have said that any increase in taxes (on rich) will create a negative perception on investment and therefore should be avoided.
I don't believe that the tax rates should be increased whether it is indirect or direct tax. Tax rate increase in India has never worked successfully. When we had high rate of taxes before 1991; collections were not very good. We should widen the tax net, one of the most important issues is that, for the first time, tax payers hesitate to come in because they think their past might be open. We must find solutions for that and widening the tax net is the solution. I hope we don't do anything where perception is affected and I think increasing tax rates would not be very good for the country.
Rajkumar Dhoot, president of Assocham and managing director of Videocon Industries: Nowhere in the world this happens. Our opinion is tax them (the rich) but tax them reasonably. They have money and with that money they invest in the country, which generates jobs. The investments from the rich men also give excise duties, sales tax and hence generate revenues also.