The term “Inheritance Tax” has been all the rage in the past few days. After what Sam Pitroda said about taxing the on their inheritance. Taxing the UHNI & HNI individuals has their has its own pros and cons from economic perspective & political perspective as well.
From inheritance taxes (a tax levied over a deceased individual’s estate) to economists and policy-makers representing as a controversial subject. Inheritance tax defenders state that the inheritance tax is the main instrument to achieve greater economic equality and wealth redistribution.
Through the means of inheritance tax, wealth distribution will not be concentrated in the hands of a few wealthy families and rather will be spread evenly among the walls of society. It evenly distributes wealth to people and among them which may help in the reduction of social class differences and also help in the formation of a stable and sustainable economy.
Yet another advantage of the inheritance tax is the possibility to collect a lot of money which can then be used to finance different governmental responsibilities. This income can be employed for funds people need for the public services and housing, such as health care, education, and transportation ultimately that would make the whole society better.
An inheritance tax can also be used as a vehicle for promoting charity giving by many jurisdictions where the tax payers have a tax deduction once they have made their contributions through the wills or trusts.
Nevertheless, inheritance tax is not without imperfections. The main argument against it is that it may slow down savings and investment process. People will reluctant to earn more because they will think a major part of their wealth will be taxed after their death.
This may have adverse effects on economic growth and innovation, which would be detrimental to a country or a region. Furthermore, despite the perception that inheritance tax is complex and administratively burdensome, it is actually lifts compliance costs to both taxpayers and the government.
Dr. Ravi Singh, SVP -Retail Research, Religare Broking Ltd said There is no simple solution to inheritance tax, as benefits and drawbacks coexist. The effect can be seen in terms of improving the economic equality, as well as through the revenue and general willingness to donate.
on the other half – it can as well discourage savings and investments and be administratively burdensome. Finding a right path between these considerations is important because of it solves the problem of design and equitability of inheritance tax policies. Said Singh.
