No Resurrection of 'Death Tax' - FM
WHILE we all joke about the certainty of death and taxes, do you know there used to be a death tax, called ‘Estate Duty'. Imagine tax collectors hovering around corpses to find out how much wealth the survivors had inherited and to tax them on the inheritance. If your rich relative died, the Government did not want you to enjoy all the inherited wealth, without sharing a part (sometimes as high as 40%) of the wealth with the Government. This was introduced in 1953 and abolished in 1985 by VP Singh.
The lofty principle behind Estate Duty is, why should Mukesh and Anil enjoy all the wealth left behind by Dhirubhai Ambani? Let us take part of it and make them a little poorer. You cannot make all Indians rich, but you can certainly try to make the Ambani brothers poorer!
There is a rumour that the Government is planning to bring back the Estate Duty. The FM has assured Parliament that there was no proposal at present to re-impose Estate Duty.
The FM told the Rajya Sabha yesterday that Estate Duty was abolished for the following reasons:
1. The contribution of estate duty to the Government revenues over the years had been insignificant.
2. Percentage of estate duty to gross tax revenue was steadily falling. It was 0.22 percent in 1972-73, 0.5 percent in 1975-76 and 0.13 percent in 1981-82.
3. The proceeds of estate duty were low despite an extremely progressive rate schedule.
4. The cost of administration of the Estate Duty Act, 1953 and the cost of compliance to the tax payer was high.
5. Both wealth-tax and estate duty laws were applicable to the property of a person, the former applying to his property before death and the latter after his death. The existence of two separate laws with reference to the same property was considered a burden on the taxpayers and the heirs of the deceased.
In his Budget speech of 1985, the then Finance Minister, VP Singh said,
As both wealth-tax and estate duty laws apply to the property of a person, the former applying to his property before death and the latter after his death, the existence of two separate laws with reference to the same property amounts to procedural harassment to the taxpayers and the heirs of the deceased who have to comply with the provisions of two different laws. Having considered the relative merits of the two taxes, I am of die view that estate duty has not achieved the twin objectives with which it was introduced, namely, to reduce unequal distribution of wealth and assist the States in financing their development schemes. While the yield from estate duty is only about Rs.20crores, its cost of administration is relatively high. I, therefore, propose to abolish the levy of estate duty in respect of estates passing on deaths occurring on or after 16th March,1985 .
[Yes, the official text shows it as die view]