‘Wealth tax could send billionaires from India to Dubai, impractical,’ says economist on Rahul Gandhi's equity proposal
Congress leader Rahul Gandhi meets people during a public meeting for the Lok Sabha elections, at Basia village, in Gumla on May 7
Political economist and author Gautam Sen has cautioned against the implementation of a wealth tax in the country. Speaking to ANI, he said such a move could drive India’s wealthiest individuals to relocate their businesses to tax-friendly destinations such as Dubai.
On the potential repercussions of such a tax policy, he said the wealthiest Indians, such as the Ambanis, and Adanis, might choose to emigrate to tax havens, leading to a substantial loss of wealth for the country.
“The very rich, that is the Ambanis, the Adanis, the Mahindras, the Tatas, and I presume not more than 500 or less of the very rich, the billionaire class, they will emigrate from India to Dubai. Most Indian millionaires who have been leaving the country have gone to Dubai, 70 per cent in fact, because Dubai has no income tax. And they will re-register their businesses in UAE, which means India will only be able to collect corporate taxes from them because their business will remain in India,” Sen said.
“So there will be a huge loss of wealth to India. Now, if you think about other countries, Sweden used to have a very significant inheritance tax. And Sweden is one of the highest tax countries in the world in history. But you know, Sweden removed the inheritance tax because many of the rich were fleeing. For example, the owner of IKEA had migrated out of Sweden,” he added as an example.
Practicality a Question
Sen also cautioned against the practicality of imposing such a tax in India, citing challenges in surveying all households and businesses.
“In India, 2.4 per cent or a little bit fewer people pay income tax. that is personal tax. Of that group, I think not more than 1.2 million, maybe a little bit more, have personal assets which are mainly in their own residence. 77 per cent of all household wealth is in residence, 7 per cent in gold and durables like motorcycles, fans, and almirahs. You have to survey all of this and take it away from them. Put all these people in the street if you want equality. But the total amount of money you will generate from this very small number compared to the rest of India would be very, very small,” said Sen.
On Congress leader Rahul Gandhi’s idea of wealth distribution, Sen said, “…It won’t work in India…As I said, only about 12 crore people have wealth in the excess of 102 crores each. But almost all of these have invested in their businesses. So, you will have to liquidate their businesses in order to take away their wealth…Economy will come to a halt…My argument is that the total amount of tax you will generate from taking everything away from anybody who has something which is less than one and a half percent of population will not make the remaining 98-99% better off. They would simply suffer…Bear in mind, you will have to do this survey every two years…We have better redistribution in the last 10 years from growth, from real goods…”
Social & Political Chaos?
He added that such a tax could lead to social and political chaos and make India vulnerable to foreign intervention.
“India is in the way of China’s total dominance of Asia. India is the one country apart from Japan which is a problem for China because China wants complete dominance in Asia. At the moment, they have a condominium in the US. They do not accept even that. They would accept a condominium with the US at a global level. But in Asia, they want to be totally dominant. And India really is the one country that is big enough and potentially prosperous enough to resist this. So they will act. Now, striking against India is a very good time because India is in a phase of transition. But of course, they know Striking against India is not costly. India is militarily quite a tough nut to crack,” he added.
Optimism for India
Sen expressed optimism about India’s economic prospects, highlighting the country’s status as the fastest-growing major economy in the world and the government’s infrastructure investments. He stressed the importance of stability and continuity in government policy to sustain economic growth and prosperity in the long term.
“The Indian economy is performing very well. It is the fastest-growing major economy in the world. If we can reach 8 per cent, which I think is possible, The size of the economy will go up by three times in 14 years. So at the moment, we are about 3.8, 3.9, maybe a little bit more. We will reach over $13 trillion. That is an impressive level of change in the next 14 years… I think India will reach $7 trillion by 2031. This is really, in historical terms, spectacular. We are very fortunate. that we have a stable government,” he added.
(With inputs from ANI)