Inheritance tax is actually the tax that affects only the fewest number of households but helps the budget substantially.. It is truly the top one percent that get affected and it isn’t on money th at you and I earn as wages. Here too getting the slab right would be crucial. For example, a house that one inherits after forty years of ownership valued at a crore cannot be at the same rate as an eight crore inheritance. The moral argument for an inheritance tax in a poor country should trump any arguments about how much money is collected or whether it will encourage tax evasion.
Leaving a legacy – whether as cash or institutions or good deeds – is one of the biggest drivers of human effort, and the less governments meddle with this idea, the better. More money in the ha nds of the government will mean more waste, more corruption. Not only would businessmen rush to hide their wealth in layers of holding companies and trusts, many would also move it clandestinely to tax havens abroad. Estate duty was abolished in 1985 because it was generating almost no revenue. Now, in a globalised world, it is even easier to shift your wealth to corporate entities – – effectively defeating the purpose of the tax. Far from stopping the generation of black money, an inheritance tax will actually encourage it.