Taxing more can drive capital away, says CEA V Anantha Nageswaran
New Delhi, Dec 13, 2024
Rejecting the idea of a "billionaire tax" suggested by noted economist Thomas Piketty, Nageswaran said, "Not all problems can be solved through fiat"
Taxing capital less may not lead to more investments, but taxing more will drive capital away. While it is easy to drive capital out, bringing it back is a lot harder, chief economic advisor V Anantha Nageswaran said on Friday during a discussion on inequality, economic growth, and inclusion.
Rejecting the idea of a “billionaire tax” suggested by noted economist Thomas Piketty, Nageswaran said, “Not all problems can be solved through fiat.”
He said that while there may be a need for billionaires to contribute more, its execution—measuring the wealth and distributing it further—will be a challenge. “We may agree on the progressivity of taxes, which we do in India. There are multiple ways to ensure there is contribution towards nation-building by the rich and all people according to their ability,” he said.
The CEA, speaking at the event organised by Research and Information System for Developing Countries (RIS), said that equality of access and opportunity matters more for public policy than equality of outcomes, relatively.
He said that enforcing equality through regulation hurts micro and small businesses more, given their limited management and financial bandwidth. “The tyranny of thresholds condemns them to remain small,” the CEA said.
He cautioned that policy experts must beware of asymmetric effects of public policy and the law of unintended consequences. Nageswaran said that the reduction of poverty, and not income inequality, is the litmus test of equitable growth.
Piketty, in his comments, said that countries earlier became rich by exploiting the world’s resources, but in the 21st century, they have achieved it by reducing inequalities.
While exhorting the government to publish more data and be more transparent with information, Piketty refuted arguments about unfair international comparisons and the quality of data in his studies on inequality in India. He said, “Whatever the imperfection of data, you will have to conclude that India is a very unequal country by comparative standards. You can reduce poverty faster by having less inequality.”
Taking part in the discussion, member of the Prime Minister’s Economic Advisory Council Shamika Ravi said that growth for India is non-negotiable. “There is degrowth in Europe. Degrowth for us is immoral. Growth is what has gotten us here,” she said while responding to the growth versus inequality debate.
[The Business Standard]
