Pragmatic approach to wealth redistribution: Need of the hour

The furious debates over inheritance tax by warring political parties have been conveniently side-lining larger truths, which is hardly a surprise especially during election time. The onus is on us, the citizens of India, to collectively brainstorm on this sticky issue in the best interests of our nation.

Like it or not, the biggest motivator for most people to work hard in life is the lure of earning monetary rewards following the effort. Barring the trickle of exceptions, bigger and better the rewards, bigger and better the performance. Likewise, most people work hard, earn money, and create wealth for themselves and their families. For most people, whether the mighty emperors of the ancient era or the corporate tycoons of today, the default action for wealth distribution (which has nothing to do with wealth redistribution for the community at large) has been to pass on the accumulated wealth to successors of the lineage; whether they are worthy or not is beside the point. To be fair, inherited wealth, in most cases, is the outcome of supreme intellect and farsighted intuition for which an individual founder has put in the hard yards. That his or her wealth is being vested in the next generation of the family is the most obvious thing to do, and there is nothing wrong with it, especially when all direct and indirect taxes and levies on it have been borne at multiple instances? Across every sphere and vertical, the heir apparent in every successful individual family is a member of the same lineage, most likely a son or daughter. And there is nothing wrong with it either.

There is another key aspect that merits close deliberation. The need for pro-poor programs can’t ever be challenged in a country like India, but the implementation of most pro-poor initiatives leaves a lot to be desired. It is one thing to collect funds for earmarked humane purposes, but there is no mechanism to monitor and measure the implementation or even know the visible difference for the end-user beneficiary. In fact, nothing ever is made public about end-user outcomes, and there is always a looming risk of potential spillage and siphoning of such funds across levels. Further, disbursement for non-CSR purposes like defence upgradation can never be ruled out.

History is replete with umpteen instances of impractical ideologies that miserably failed to institutionalise a social equity and equality rooted in utopian beliefs. Marxist ideals and Gandhian principles, despite the sanctity of thought and intent, could not create the classless societies they widely advocated, nor could they bridge the ever growing divide between the haves and the have nots. With due respect to Mahatma Gandhi, his clarion call for building societal wealth (as opposed to individual wealth) largely fell on deaf ears, and worse, unknowingly helped a handful of wealthy individuals to grow wealthier in post-independence India.

Benevolent and selfless behaviour can never be infused through state action. Rather than deny or dismiss this cardinal fact of life, it is a gainful exercise to prudently work around it to explore feasible solutions to minimise its downsides, if not completely weed them out. Taking a contrarian approach, we can gainfully focus on how to make philanthropy more glamourous by motivating the wealthy to wilfully donate towards serving the larger cause of humanity and attain celebrity status as large-hearted donors. What is the point of enforcing draconian measures that only prove counterproductive as they dampen the altruistic spirit of the affluent sections of the populace.

The government has the better option of formulating a prudent policy whereby a certain percentage of wealth (of the rich and the ultra rich) can be mandated to be donated for social development initiatives of the donor’s choice. A threshold could be fixed for the applicability of this percentage which can vary in line with different bands, like how income is taxed according to different slabs. Rich individuals below the threshold can donate if they wish to. An autonomous body can be formed to fix the threshold, decide the bands, and identify a drop-down menu of various donation-worthy initiatives under well defined heads like women empowerment, value-added education in rural areas, financial inclusion, poverty alleviation, employment and entrepreneurship generation, primary health upgradation so on so forth. That the choice of objective would be the donor’s prerogative and the participation in India’s inclusive growth effort would be duly recognised and revered will take away the burden of donations that invariably keeps most wealthy individuals reluctant to donate for the larger cause of the country.

More importantly, the autonomous body can monitor the progress of the donations made with periodic reports on fund utilisation and project outcomes. This level of transparency will motivate the well-off donors to cherish their donations as devoutly as they relish their investments. There should also be a system of awards and accolades to honour the most benevolent of wealthy individuals – both through monetary incentives like lower tax rates, as also through haloed felicitation programs and revered mentions in government literature and global case studies. Name and fame is as strong a motivation as money and it will inspire many more people of the affluent class to become wilful donors.

Inclusive growth is a top priority for India, but equal opportunities for the poor should not come at the cost of penalising the wealth creators from affluent sections. Our focus instead should be to nurture a conducive environment for as many wealth creators from the deprived sections as possible. This way, we can pave the way for institutionalising a social equity and equality rooted in pragmatic beliefs.

Dr. B S Ajaikumar, Executive Chairman, Healthcare Global Enterprises Ltd