About Wealth Tax:
- Wealth Tax is levied on the net market value of various assets owned by an individual, such as cash, bank deposits, shares, fixed assets, personal cars, and real property.
- Globally, several countries like France, Portugal, and Spain impose wealth tax.
- The primary objective of the tax is to target unproductive and non-essential assets of individuals.
Wealth Tax in India:
- Introduction: The Wealth Tax Act was introduced in 1957 based on the recommendations of the Kaldor Committee (1955) as a part of tax rationalization measures.
- It imposed a 1% tax on earnings exceeding ₹30 lakh per annum for individuals, Hindu Undivided Families (HUFs), and companies.
- Abolition: Abolished in 2015 due to issues such as Extensive litigation, Increased compliance burden, and High administrative costs.
- Replaced by an increase in the surcharge on the super-rich.
- Replacement measures: The surcharge for individuals with income exceeding ₹1 crore and companies with income over ₹10 crore was increased from 2% to 12%.
Other Relevant Economic Concepts:
- Tobin Tax: A tax on financial transactions, especially currency exchanges.
- Pigovian Tax: Levied to correct negative externalities (e.g., pollution tax).
- Laffer Curve: Demonstrates the relationship between tax rates and tax revenue.
- Tax-GDP Ratio: Indicates the tax revenue as a percentage of GDP, critical for fiscal analysis.
