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The UPA government should introduce inheritance tax

columns Updated: Mar 06, 2011 13:07 IST
Khushwant Singh
Khushwant Singh
Hindustan Times
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We admire men who by their own efforts acquire wealth that will last for seven generations (saat pushton tak). We believe that inheritors of such wealth have every right to enjoy the bounty left to them by their ancestors — baap dada ki jaidaad.

These are feudal concepts which many capitalist democracies have abolished. Countries which stick to the feudal system of inheritance run the risk of becoming oligarchic. I learnt this from reading a well-argued essay written by Adess Singh of Mohali, Punjab.

He quotes eminent economists and statesmen to warn us of the dangers of not levying tax on inherited wealth. He writes: “The Indian society being family-centric, unfettered inheritance acts as a sweet poison, bonding a free person into a ‘dynastic slave’ and in time polarising wealth and opportunity in society to the point where the social fabric is stretched to breaking point... Inheritance was clearly justified only when it was necessary to provide for dependent children.

“John Millar supported a change in the inheritance laws such that wills would be enforced only for a limited part of a person’s property. He saw this as entirely compatible with a respect for property rights.

“Thomas Jefferson, who described The Wealth of Nations as ‘the best book extant’ on political economy, famously wondered at about the same time whether all hereditary privileges should be abolished since ‘the earth belongs in usufruct to the living’.”

He could have been quoting Smith with those words: It is “the most absurd of all suppositions,” said Smith, “…every successive generation of men have not an equal right to the earth.”

The ill-effects of unbridled inheritance can be seen in Pakistan. “Pakistan is one unfortunate country where the pathological effects of unbridled inheritance in a feudal society have become very clear. The polarisation of wealth and opportunity is stark and is tearing up the social fabric of society. The recent example of the Swat Valley brings forward what is in store for those societies that do not stop this polarisation. We all know that the Swat Valley in Pakistan was taken over. The entire Swat Valley was previously controlled by just four dozen landlords. The landlords and the elected leaders were mostly the same people, protected by a de-motivated and underpaid police force. It took the full might of the Pakistan Army assisted by the US to regain the control of the Valley,” Adess Singh says.

Today England, France, Germany and Greece levy a 40 per cent tax on inherited wealth.

Some other European countries have lower rates.

I am sure our Prime Minister, as a top-grade economist, and Finance Minister Pranab Mukherjee, must be well aware of all that Adess Singh has spelt out.

Isn’t it time the UPA government also thought of introducing an inheritance tax? Give it a thought.

One day Emperor Akbar asked Birbal what he would choose if he were given a choice between Justice and a gold coin?

“The gold coin,” said Birbal without hesitation.

Akbar was taken aback. “You would prefer a gold coin to justice?” he asked incredulously. “Yes,” said Birbal.

The other courtiers were amazed by Birbal’s display of idiocy. For years, they had been trying to discredit Birbal in the Emperor’s eyes but without success and now the man had gone and done it himself! They could not believe their good fortune.

“I would have been dismayed if even the lowliest of my servants had said this, continued the Emperor. “But coming from you it’s… shocking and sad. I did not know you are so debased.”

Birbal’s solution: “One asks for what one does not have, Your Majesty!” said Birbal quietly. “You have seen to it that in our country justice is available to everybody. So as justice is already available to me and as I am always short of money, I said I would choose the gold coin.”

The Emperor was so pleased with Birbal’s reply that he gave him not one but a thousand gold coins!

(Contributed by Vipin Buckshey, Delhi)