In the latest Budget 2024-25, an eyebrow-raising revelation has emerged: individuals are now contributing more to government revenue through income tax (19%) than corporations (17%). This shift stems from a decision five years ago to provide corporations with a significant tax break, purportedly to spur private investment and job creation. However, as the dust settles, we must ask—has this gambit paid off?

The stark numbers suggest otherwise. The promised boom in jobs and capital investment is elusive, and the indian economy is displaying signs of K-shaped growth, where the rich get richer, and the poor get poorer. According to a study by the Paris-based World Inequality Lab, income and wealth inequality in india have reached alarming heights, with the top 1% holding 22.6% of the income and 40.1% of the wealth by 2022-23. These figures echo the stark disparities of the british Raj, a time many hoped was long behind us.

In an open letter to the Union finance minister, sanjay jha poignantly questioned the real impact of these tax cuts. "Where are the jobs? Where is the capital investment?" he asked. The data paints a troubling picture. Over the last five years, the government has foregone an estimated Rs 8.7 lakh crore in revenue due to corporate tax cuts. Meanwhile, corporate tax contributions have grown by a mere 2.3% annually, while individual income taxes have surged by 4.5%.

This skewed contribution ratio began to tilt conspicuously in 2019, when the finance minister announced a drastic cut in the basic corporate tax rate from 30% to 22%. The rationale was clear: incentivize corporate growth, and the benefits would trickle down. Yet, the dividends and stock market bull run seem to suggest that the benefits were largely absorbed by the corporates themselves.

As we sift through these figures, one can't help but notice the irony. The tax relief intended to empower corporations appears to have contributed to widening the chasm of inequality. The indian middle class and the underprivileged are shouldering a heavier tax burden while the wealthy reap the benefits. The income tax system, it seems, might be regressive when viewed through the lens of net wealth.

In the grand narrative of economic policy, this is a sobering chapter. The Budget 2024-25 has laid bare the pressing need to reassess our fiscal strategies. It is crucial to ensure that tax policies foster equitable growth, rather than exacerbating the divide between the haves and the have-nots. As we move forward, let’s hope for a more balanced approach that truly benefits all strata of society, creating an economy where prosperity is shared, and not hoarded.
For more interesting updates wa click and follow Indiaherald WhatsApp channel

Find out more:

Budget

Sindujaa D N

23/07/2024 07:12 PM