Pervaiz Alam@pervaizalam
India’s poorest pay higher effective tax rates than the rich, finds major new study by Prof Mukulika Banerjee of the LSE.
Speaking on cine ink podcast London Vārta: New World Order, Prof Banerjee notes:
Lower-income Indians are shouldering a disproportionately heavy tax burden compared with the wealthiest sections of society, according to new research that challenges widely held assumptions about the country’s tax system.
Dr Mukulika Banerjee, a leading political anthropologist, has revealed that while everyone pays the same Goods and Services Tax (GST) on everyday items, the impact falls far more heavily on the poor when measured as a proportion of their income.
“Everyone pays GST – indirect tax – and the poor in India end up paying a higher proportion of their income in tax than the rich,” Dr Banerjee explained. “If you buy a packet of biscuits and a rickshaw puller also buys a packet of biscuits, the GST charged on that packet is exactly the same for both of you. But the rickshaw puller earns far less than you, so in proportion to his income, he is paying a much higher rate of tax. When you aggregate this across the country, the bottom fifty per cent of the Indian population is paying a higher proportion of their income in tax.”
Her findings, part of a British Academy-Leverhulme Senior Fellowship, raise serious questions about taxation, inequality, and the health of India’s democracy. Fieldwork data paints a stark picture of the country’s extreme wealth gap: a daily-wage construction worker, fruit vendor, or pavement tailor earning around ₹30,000 per month qualifies for the top 10 per cent of earners, while half of all Indians survive on just ₹6,000 a month. Meanwhile, the top 1 per cent captures a strikingly large share of national income.
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