Anjan Roy
THE stock market has crossed the 80k-mark. In more concrete terms, the market capitalisation has touched $5 trillion. At this level, the Indian stock market is far bigger than the size of India’s GDP.
This is certainly a good augury. It is a reflection of the robust health of the Indian economy and its prospects. Foreign institutional investors have once again started bringing in investment dollars into India. It also means that Indian owners of stocks are getting hugely richer with every upward movement of the stocks. That’s also good news. The investors must gain in order to create a feel good factor which is critical for continuing prosperity.
But is this rising prosperity or even a small portion of it available for the common good? No, it is not. Individual investors are becoming richer and richer, without flexing a muscle just because the stock market is rising and their net worth is shooting. But none of that additional wealth can be tapped by the Government for making fresh public investment or achieving urgently needed policy goals.
The US parallel
This Indian scenario has parallels. The USA is facing the same predicament. Consider this: since the frenzy began about Artificial Intelligence, the share price of Nvidia, the specialised chips making company, has skyrocketed. In the process, the stock value of the principal shareholder of the company, Huang Jen-Hsun, has risen by $100 billion in a year! But as long as the stock owner is not selling his assets and realising the capital gains on it, none of that stupendous wealth is available to the Government for tax purposes. You have your rich citizens becoming unimaginably richer, but your Government, the society at large, cannot get any share of the pecuniary gains.
It is important for the Government to lay its hand on the booty. Some people may differ. But this is imperative. Even if a small part of this windfall profits were to be tapped, the funds so garnered could be invested which can have a multiplier effect on the economy. To make this clear, I will cite discussions at a multi-institutional think-tank seminar.
Financial resources
In a session on global financial structure, Dr Rakesh Mohan, former Deputy Governor of RBI, observed that the World Bank has a paid-up capital base of $22 billion. Even a marginal increase in its paid-up capital base by, say $10 billion would enable it to raise additional resources of $50 billion to $60 billion. If this were to happen, the additional resources would translate into scores of development projects in poorest countries.
Set this need for additional financial resources for one of the most productive multinational agencies against the mammoth $48 billion of a single individual. Elon Musk’s shareholding in his company is going up and up in the current phase as the US stock market is rising. There are hundreds of other billionaires whose net wealth is touching stratospheric levels but none of that can be taxed.
Taxing the super rich is a critical issue which is being hotly discussed at various platforms from the World Economic Forum to other multinational forums..
Budget consideration
At a time when the Union Finance Minister is formulating her full Budget for 2024-25, taxation of the super rich should engage her serious attention. Under the tax laws, no capital gains could be taxed until it is realised as accrued income. The rich and the super rich do not sell their holdings but continue to hold on to them. This way their wealth increases every year in a bullish stock market. Instead of selling their shares and stocks, they ‘gift’ these to their near and dear ones without attracting any tax. Their riches are beyond the pale of taxes.
Should the super rich not be willing to part with a small amount of the super gains they are making annually and make it available to the Government for productive use for the common good? This is something worth pondering over.
