50% of India's poorest pay nearly two-third of GST

Around every World Economic Forum (WEF), the Oxfam report on inequality causes a stir. In the midst of this year's debates and discussions, former US Labour Secretary Robert Reich tweeted "Since 2020, for every dollar the bottom 90 per cent have gained, billionaires have gained $1.7 trillion. This level of inequality is not only unsustainable, it's downright cruel."

With mountains of wealth accumulating at the top, we still find the superrich making all-out efforts to dodge the tax regime, brazenly jacking up consumer prices to cause an unmanageable inflation. Using public money to generate more profits, manipulating stock markets and leveraging tax-havens to their advantage, it is part of a strategy donning the new playbook of the stinking rich.

And therefore, among numerous measures suggested to narrow the widening inequality, Oxfam suggests taxing the top five per cent of the world's multi-millionaires and billionaires that could raise $1.7 trillion a year, enough to lift two billion out of poverty!

While the world struggles to find a mechanism to tame the shrew, perhaps a series of comics, which kept us glued from the days of the Phantom to more recent fantasy world of Spiderman, can now move to the real world of the superrich thereby reaching out to the unreached. Not only carrying the thrill of amassing wealth in a mad race to reach the top of the heap, any comic series on the theme will not only address the curiosity but also unravel the mysterious pathway.

Create an imaginary character like Rajni (from the yesteryear Indian TV series) who can take on the might of the superrich only to ensure the riches are distributed for the benefit of an egalitarian and a cohesive society.

The poor too need to know where their money goes. A comic series is an easy way to reach out to the masses. It has to become a people's campaign for equality and justice. Unless the poor know how they have been systematically robbed, building up an international campaign for an end to rising inequality may not help accomplish the task.

Nevertheless, at the time of release of the report, Gabriela Bucher, executive director of Oxfam International was quoted as saying, "While ordinary people are making sacrifices on essentials like food, almost every day, the superrich have outdone even their wildest dreams. To illustrate, Oxfam compared the three per cent tax that Elon Musk, CEO of Tesla, Twitter and SpaceX paid between 2014 and 2018 while a small rice trader in Uganda ended up paying 40 per cent tax. Such similarities can be drawn from every developing country, including India.

In an eye-opening observation, Oxfam says that the poorest 50 per cent in India end up paying almost two-third of the GST whereas the richest 10 per cent pays only 3-4 per cent. Given that the total GST collection for 2022-23 is anticipated at Rs 18 lakh crore, the indirect tax extracted from the bottom poor is enormous. While many have questioned the methodology, the argument that the poor pay a high level of indirect taxes remains true. This should dispel the popular impression that by not paying any taxes, the poor remain a burden.

Even for the rich developed countries, Warren Buffet had stated some years back that he was paying less tax than what his secretary was shelling out.

While top economists, including Nobel laureate Joseph Stiglitz, wants the income of superrich to be taxed at 70 per cent and in addition 3 to 4 per cent wealth tax to tackle widening inequality, even Oxfam calls for a three per cent wealth tax on Indian billionaires. It estimates the revenue so generated can fund the country's largest healthcare system, the National Health Mission. But as the demand for re-introducing wealth tax grows, I find some economists saying that it will not be cost-effective. The collections from wealth tax would be too little while the cost of collection would be high.

But strangely, an equally loud demand for taxing the agricultural sector continues to be raised. Ahead of every budget, the demand becomes louder.

Given that 85 per cent of the farm landholdings are less than five acres and the average farm household income has been worked out at Rs 10,268 per month by the Situation Assessment Survey for Agricultural Households, 2019, I don't know how collecting a pittance of tax from agriculture sector is being justified.

For wealth tax collections, economists stand up saying it is not cost-effective to collect a pittance but for agriculture sector the same group of economists have no problem with the huge costs involved. Different strokes for different people.

Not only that Elon Musk and Jeff Bezos pay less tax, even India's billionaires pay low taxes.

In a 2022 study "Do the Wealthy Underreport their Income? Analysing Relationship between Wealth and Reported Income in India", director of the Delhi School of Public Policy and Governance, Ram Singh, comes to an interesting conclusion when he says 'the wealthier an individual is, the smaller their reported income is relative to their wealth'.

Explaining that wealthy avoid realising capital gains by investing dividends in equity and commercial properties to reduce their tax liability, he demolishes the argument that affluent Indians are 'overtaxed'. Business tycoons pay themselves too little, which sounds charitable, but in reality are into tax-saving strategies.

Policy makers aren't enthused enough to make a determined effort to reduce inequalities. Even by reducing corporate tax, as India has done, Nobel laureate Paul Krugman had earlier shown that in the US it did not help in creating additional employment, nor did it help in bringing in additional investments. Where did that money go, it went into their pockets.

The corporate tax exemptions that Donald Trump had provided for actually enabled the companies to buy back large number of shares, he had clearly explained. That has been a shrewd way to add on to the wealth of the superrich.

(The author is a noted food policy analyst and an expert on issues related to the agriculture sector. He writes on food, agriculture and hunger)