Business & Finance

Whopping 40% Tax For The Rich: IRS Officers Suggest Prime Minister

A paper titled ‘Force’ is recommendations by the IRS to PM on revenue mobilization & the economic impetus to fight COVID-19.

New Delhi| A group of top IRS officers has recommended a super-rich tax and a higher duty on foreign companies to keep the cash till flowing as part of short term measures to help the government fight the COVID-19 pandemic.

The recommendations are part of a paper titled ‘Force’, which stands for ‘Fiscal Options & Response to the COVID-19 Epidemic’, proposed by the Indian Revenue Service (IRS) Association to CBDT (Central Board of Direct Taxes) Chairman P C Mody.

According to the paper, tax relief should be limited to fair and compliant taxpayers, especially those filing returns on time as there have been many cases of non-filing of returns, increase in non-deductions and withholding of TDS apart from rising under-reporting of tax liabilities through bogus loss claims.

“In times like these, the so-called “super-rich” have a higher responsibility towards assuring the larger
public good. This is for multiple reasons – they enjoy a higher capacity to pay with significantly
higher levels of disposable incomes compared with the rest, they have a higher stake in ensuring the
economy springs back into action, and their current levels of wealth itself is a product of the social
contract between the state and its citizens. Most high-income earners still have the luxury of working
from home, and the wealthy can fall back upon their wealth to cope with the temporary shock. In
view of several European economists, taxing the wealthy would be the most “progressive fiscal tool”,
as wealth is far more concentrated than income and consumption.
A surcharge had recently been raised, and the fact that the additional surcharge was only expected to
generate a mere Rs. 2700 crores in additional revenue, this may not be a feasible step in terms of
potential revenue impact.”

The centre has halted the inflation-linked allowance for its staff and pensioners, a move that will help it save around Rs 37,000 crore.

Also Read: More Than 6.3 Crore MSMEs on Verge of Economic Ruin: Sonia Gandhi

Some of the short term measures suggested in the paper include a super-rich tax by raising the highest slab rate to 40% for those with an income above Rs 1 crore from 30% and re-introduction of wealth tax for those with over Rs 5 crore annual income.

Short term refers to a time period of 3-6 months.

The paper has been prepared by a group of top 50 Indian Revenue Service officers.

The IRS group has also advised that the ultra-rich be taxed through two alternative ways which can be imposed for a limited time.

First is to raise the highest slab rate to 40% for total income levels above a minimum threshold of Rs. 1 crore from current 30% and two re-introduction of the wealth tax for those with a net wealth of Rs. 5 crores or more.

For the medium term, 9-12 months time period, the officers suggest increasing additional revenue from foreign companies functioning in the country by increasing the surcharge on their income from the present 2% for Rs 1-10 crore and at 5% on incomes over Rs 10 crore.

They have also called for imposing a COVID-19 cess to help mobilise additional revenue. The one-time ‘COVID Relief Cess’ of 4 per cent can help finance capital investment, as per the paper.

According to an initial assessment, such a cess can fetch Rs 15,000-18,000 crore for the exchequer, the paper said.

(Input from Agencies)

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