Kovid has wreaked havoc on the poor, on the other hand the stock markets have boomed. The frenzied manner in which the central banks of all the countries have printed currency has started in the stock markets. And markets are creating new peaks. Those who were very rich, their goods were further increased. In such a situation, some people say that Kovid tax should be imposed on billionaires. They should be taxed so that they have benefited from the stock market so that they can help the poor.
Analyst Shankar Iyer says that in 2020-21 tax should be levied on property created from stock market. He is talking about imposing such a tax on billions of dollars, ie people whose assets are more than 7 thousand 300 crores. He is talking about leaving it to the leaders to decide the rate at which tax will be levied. For this there should not be a lot of stigma, for this, they say that this tax should be levied only on the benefit from listed shares and not on the unlisted shares. Property and jewelery also should not be levied such tax because their price cannot be judged accurately and lawless litigation will begin.
The thing seems to be quite right morally. Those who are in favor of it say that the imposition of this tax only for 2020-21 should not affect the future investment and markets, as the Permanent Wealth Tax might do. The Permanent Wealth Tax was argued by Thomas Piketty and a few others. He said that this would reduce the equity in society. Proponents of the Kovid tax say that it will affect even barely 100 Indian billionaires. It is estimated that the wealth of such people through the stock market would have increased by about Rs 13 lakh crore since March last year. Some billionaires may also welcome such a one-time tax so that the poor can be helped.
But the trick is that it will not make it. The government can say that this is a one-time tax, but hardly anyone can believe it. Those who have previous experience, such as matters related to Vodafone or Cairn, consider the lack of credibility of Indian leaders on the tax front.
If new strains come, then the Kovid can remain for many years and in this case this proposed tax can also continue. Every country wants big foreign investors to invest money in it. India is also in this competition. So if India imposed this tax, then billions of dollars would go to other countries.
Foreign institutional investors own a large share of the tradable shares of large Indian companies. If these investors increase the speed of selling such shares even then the stock market will be enraged. This will also have an impact on private investment and spending. At the same time, the government’s plan to bring IPOs of government companies, selling controlling stakes in them, handing them over to private hands and selling their other assets will also be stifled. Overall, this will slow down the economy and reduce revenue from all other sources. In this way, the revenue generated from the new tax will be far more out of hand.
When Kovid had hit the first claw and foreign investors had sold 62 thousand crore rupees in March, the Sensex had dived from the 41 thousand level to 26 thousand. But after that in recent months, foreign investors dumped money. He purchased 60 thousand 350 crore rupees in November and 62 thousand 16 crore rupees in December. The stock market started leaping again. If Kovid tax is imposed, this edge of money can turn back and create chaos.
Talking about the theory, this Kovid tax may not be imposed on foreign institutional investors, but it will also mean discrimination from Indian investors. Not only this, there will also be discrimination against those who buy shares as compared to those who buy bonds.
Fortune magazineGives information about the goods and furnishings of billionaires, but that property does not belong to any one person. Most companies are controlled by a number of trusts, units created abroad, unlisted companies and other financial measures. For example, control of the Tata Group is exercised through Tata trusts. And there is no income tax on them. If a one-time tax is levied only on individuals and all other units are kept out of its purview, then it would be utterly illegitimate. It will not get any special revenue either. On the other hand, if all other units are taxed, the stock market will be shaken, litigation will increase and black money will also increase.
Taxing profits from the stock market is a wealth tax. In the era of poverty poverty slogan, Indira Gandhi raised the income tax to 97.75 percent and the wealth tax to 3.5 percent. This did not increase revenue much, but the private industry, the stock market and the economy were badly affected. Businessmen took all the right and wrong ways to put their wealth and income in low-tax or non-tax measures. Unlisted companies, Money sent to trusts and black money bases. The right to record profits in the company’s books meant that the stock price was strong and consequently higher wealth tax. And then he would also have to sell his shares to the businessmen to pay tax. In this way, instead of gradually committing economic suicide, the businessmen started losing large part of the profits from the ledger so that the share price decreased as well as their wealth tax liability.
A major reform that Manmohan Singh made as Narasimha Rao’s finance minister was the abolition of wealth tax on shares. This once again showed profits in the books of any listed company, raising share prices and benefiting smaller shareholders along with the government. Creating wealth is a social goal for the shareholder, but taxing the shares will be a major setback, even if it is a one-time move to impose a taxiderm.
Piketty understood that if a country imposes wealth tax, rich people will take their money to places where there is no tax or no tax or there is no special inquiry about money. Such countries are called tax havens. So Piketty talked about a global wealth tax, which should be agreed in all countries. But this does not seem to happen at the moment.
Till recently, wealth, property and many other properties in India were subject to wealth tax. There were no shares in its purview. This tax was abolished in 2015. The reason was income incomes, expenses Rupaiya. That is, the revenue was barely thousands of crores, but the cost of this tax collection was more than that.
So the lesson is that by imposing a Kovid tax, the revenue may increase slightly, but there will be chaos. Reducing the odds is a different goal. For this, other methods should be adopted. It is good that the RBI should fill only the required notes and not to take the risk of imposing Kovid tax.
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