Former finance minister and parliamentary standing committee on finance chairman Yashwant Sinha said Thursday taxing the super rich was a bad idea since it would hurt the honest and salaried more.
Prime Minister Economic Advisory Council chairman C Rangarajan had recently suggested in an interview to The Economic Times that India could think of a higher tax rate on substantially high incomes.
“If the super rich are considered to be those with Rs 10 lakh taxable income in a year, you are reaching out to the upper crust of the middle class and not really to HNIs (high networth individuals). If you increase the tax rate, even these will start going out and evade taxes,” Sinha told The Indian Express.
He also spoke against inheritance tax, pointing out that he was the one who abolished gift tax. Sinha noted that tax rates were well-settled and the government should not meddle.
Pointing out that most HNIs and super rich were self-employed, he said it was easy to catch the salaried individual but quite difficult when you deal with the self-employed.
“So, any such move will end up increasing tax on honest tax payers.”
While the fiscal deficit is a growing concern for the economy, Sinha said the government could cut expenditure. He, however, added the current finance minister may resort to unconventional methods.
“He can postpone the fertiliser, food and oil subsidy and may save even up to 1 per cent of GDP. He can also reach out to corporates and say—pay higher advance tax and we will return it in the first quarter. The worst thing he can do is push some expenditure below the line as he had done in his earlier budgets.”