What Exactly is the Covid Tax? And is it Fair to the Rich?


What Exactly is the Covid Tax? And is it Fair to the Rich?

Illustration: Robin Chakraborty

Raising income tax rate to 40% for those earning over ₹1 crore, re-introduction of wealth tax, a one-time Covid-19 cess of 4% on taxable income of over ₹10 lakhs, a three-year tax holiday for all corporates and businesses in the healthcare sector – these were some recommendations by over 50 officers of the Indian Revenue Services (IRS) in a policy paper titled FORCE.

The paper argued that we must tax the rich. “The government needs to spend considerably more to revive the economy and it needs to raise additional revenue, but in ways that must not burden the already distressed common man,” the paper says. “In times like these, the so-called ‘super-rich’ have a higher obligation towards ensuring the larger public good.”

While the paper also made a case for direct benefit transfers for the poor, steps to boost consumption and how the healthcare sector can drive the economy, it was the 40% tax for the rich and reintroduction of wealth tax for the super rich that drew sharp criticism on social media.

“While the entire world is running in this one direction and offering tax incentives to revive the economy, India would be running in the opposite direction firing away from where there’s no danger coming,” said journalist Shekhar Gupta in a video.

“The last thing we need at this point is tax or regulatory adventurism. That will be the final straw,” tweeted Vikram Chandra.

The news story invoked a flurry of jokes on social media leading to the trending of the hashtag #IRSJokes.

However, some have also defended the paper. Yogendra Yadav said it filled him with hope. “Nothing subversive or anti-Govt here. Just a range of policy options, offered with due diligence & professional scrutiny. Shocking that just the mention of inheritance, wealth tax sends the government into a tizzy,” he said.

A strong case has also been made for levying a Covid wealth tax on the ultra rich, and how a 4% tax rate on the nation’s 953 richest families would give the government the equivalent of 1% of India’s GDP to spend.

The IRS Association distanced itself from the paper, saying it does not represent the official views of the entire IRS, or the IT department.

The Income Tax Department stated that CBDT never asked the IRS Association or these officers to prepare such a report. “It is reiterated that the impugned report does not reflect the official views of CBDT/Ministry of Finance in any manner,” the official handle of the Income Tax Department tweeted.

The government also distanced itself from the IRS Association’s Covid-19 report calling it “irresponsible”.