Inheritance Tax & Inequality: Global experience and lessons for India

Income and wealth concentration in India today is very high by international and historical standards. One of the factors that is attributable to concentration of wealth is that inherited wealth and invested capital (in the stock market, in real estate) grows faster than income. Taxing this inherited wealth with an inheritance tax, complemented by political strategies can address the problem of extreme inequality.

The Indian economy has had one of the highest growth rates in the world for a fairly long period; but that growth hides several disturbing long-term trends. One of the alarming trends, is growing inequality which is aggravated in the recent years. The successive rounds of India Human Development Survey (IHDS) data shows that income inequality in India has increased from 0.53 in 2004-05 to 0.55 in 2011-12.6 If compared with the latest Gini coefficients of BRICS countries, viz., Brazil (0.50), Russia (0.41), and China (0.46), India appears to be more unequal.