The notion of imposing additional taxes on billionaires has resurfaced, with the Congress party urging Prime Minister Narendra Modi to consider such measures. This proposal, advocating a 2 per cent wealth tax on India’s 167 billionaires, aims to address the stark income inequality and fund crucial public services like education and healthcare. With India experiencing unprecedented economic growth, it is imperative to examine the implications and potential benefits of taxing the superrich.

Income inequality in India is at a historic high, with the richest 1 per cent of the population holding an increasingly large share of national wealth. This disparity not only undermines social cohesion but also stifles economic mobility for the lower and middle classes. By taxing the ultra-wealthy, the government could generate significant revenue to invest in essential public services, thus promoting a more equitable society. The proposal for a wealth tax for the ultra-rich is not without merit. A 2 per cent tax on billionaires’ fortunes could potentially raise 1.5 trillion rupees ($18 billion) annually, a substantial sum that could be directed towards improving the quality of education and healthcare.

These sectors are critical for the country’s long-term development and could greatly benefit from increased funding. Moreover, investments in renewable energy and other sustainable initiatives could position India as a global leader in addressing climate change. Critics argue that taxing the wealthy might drive them to relocate to countries with more favourable tax regimes, resulting in a loss of investment and entrepreneurial talent. However, this concern may be overstated. Many billionaires have deep-rooted business interests and personal ties in India, making relocation less likely.

Furthermore, a well-structured tax policy with incentives for reinvestment in the local economy could mitigate this risk and encourage wealth retention within the country. The debate on taxing billionaires extends beyond national borders. Brazil, which now has the G20 presidency, is pushing for a global wealth tax, supported by the EU Tax Observatory’s proposal for a 2 per cent levy on fortunes exceeding $1 billion. Such a measure could garner up to $250 billion annually from approximately 3,000 individuals worldwide. If adopted, this could set a precedent for international cooperation on wealth taxation and help address global income inequality.

India’s position on this global proposal will be closely watched. Supporting a global tax on billionaires could enhance India’s standing as a champion of equitable economic policies. It could also align with the country’s aspirations to play a more influential role in global governance. However, it is essential to ensure that any tax policy is carefully designed to balance revenue generation with the need to maintain a conducive environment for business and innovation. By leveraging the wealth of the ultra-rich, the government could make significant strides in improving public services, reducing income inequality, and fostering sustainable development. While concerns about capital flight and investment loss are valid, they can be mitigated through thoughtful policy design and international collaboration.