Recent controversy on the innovative idea of introducing Inheritance tax has wider conundrums.
Inheritance tax seeks to tax the assets and property transferred to the children of deceased parents. The government will levy 45% of the transferred income from the assets and the rest will be distributed among the children.
By doing so, first the government is creating a mentality among the parents not to generate enough capital to be left behind for the children. Also it will lead to harassment of the children of the deceased parents. We know how tax collection in the country can be tedious and coercive for the citizens.
Second, according to the social contract, the government is bound to offer services to the citizens who pay taxes. Does the corpus so collected has the potential to offer benefits to the children in the long run in the form of health insurance, education benefits, tax rebate? It is the larger question to ask.
Third, the tax to GDP ratio of the country will improve only marginal by collecting such tax. Because GDP of any country is the sum total of all goods and services produced in a financial year and tax is collected after the parents are deceased who no longer contribute to goods and services production. So tax buoyancy will be marginal.
Some benefits that can be comprehended are - social security to the children. It is the most important benefit, since deceased parents may not equally distribute wealth among their children due to large number of factors like adopted children, off springs who settled abroad may not get equal share in the distributed wealth, etc. So inheritance tax acts as Tax deducted at Source (TDS) for the deceased parents. The children will receive the remaining 55% of the asset income of the deceased parents, with the Government as the regulator.
Nevertheless a tax on the deceased parents, will be a blow to the departed soul. Dont tax the deceased clean income , however Government can tax the unclean properties of the deceased as inheritance tax like black money tax. Spare the soul.
