Opinions on taxes on assets almost always depend on one’s position in life. Those without assets see the merit in taxing the asset-rich and those who have built or inherited assets will argue for no or low taxes. After all, they argue, that tax on the income has already been paid and then the assets have been created — why tax them again? But other than a few tax havens that have zero tax on income or profit from assets, most nations tax both income and profits from assets. As does India. The tax regime in India has been used to nudge investors in certain directions and has ended up in a thoughtless hotchpotch with no first principles in sight. Worse, the lack of policy predictability leaves investors angry and confused as they are unable to make long-term decisions with their money. I argue for a first-principles-based approach to taxing both income and profits from assets for a nation that is on the road to middle-income status.
