Impose exit tax on fleeing rich and educated

The Prime Minister had expressed his resolve to make Varanasi the global spiritual capital. Followers of different religions live together peacefully in countries like Malaysia and states like Kerala in our country. One reason is that the followers are more aware about the beliefs of the other religions and do not consider them antagonistic to their beliefs. The Government must establish "Indian Institute of Religions" on the lines of IITs and IIMs in each state. Departments of different religions may be stablished in these institutes so that a constructive dialogue takes place and better understanding is created between the religions

The consultancy company Henley and Partners assists the rich to migrate from one country to another. It has said that the numbers of rich wanting to migrate out of India have increased by 63 percent in 2020. Certainly there is contribution of the Covid pandemic.

However, in 2018, before the pandemic, the Afro Asian Bank in its Global Wealth Migration Review reported that 15,000 rich persons migrated out of China, 7,000 from Russia, 5,000 from India and 4,000 from Turkey. Three of these four countries—namely, China, Russia and Turkey—are dictatorial in their political setup. We may speculate that the out migration from these countries could be due to political suffocation. The inclusion of democratic India in this list is ringing a danger bell for us.

On the other hand, the destination of the rich was 12,000 to Australia, 10,000 to the United States, 4,000 to Canada and more importantly 100-plus migrated to a developing country like Mauritius. We lost the rich while Mauritius gained. The out migration of rich from India is, therefore, not merely due to the Covid pandemic but has deeper causes.

Contrary to this assessment, Avendus Wealth Management, which too helps the rich to migrate, has said that India need not worry about this out migration because India is creating more numbers of rich than those that are going away. This much is true that the numbers of rich in India is increasing despite this out migration.

However, if we have to become a developed country and have ourselves included in the countries in the forefront of the world, then we will have to develop the capacity to attract the rich from other countries just as Australia, United States and Canada are doing.

Let us first dismiss three alleged reasons for this out migration. The rates of income tax in Australia are high yet the rich are migrating to that country in hordes. This establishes that allegedly high tax rates are not the cause of the out migration. The availability of good quality education and opportunities in hi-tech finance and technology sectors is also plentiful in India. Therefore, these cannot be held to be the causes of outmigration.

The report of Afro Asian Bank says that one main reason for outmigration from a country is safety. Rich like to migrate if they find that their families are not safe. Religious disturbances are said to be the second reason. The presence of religious disputes leads to agitations and endangers the security. The third reason is freedom of media and entertainment.

This is important because the rich may want to live in a "free" environment. They do not like that they may be prevented from obtaining information freely. They may themselves like to express themselves freely. Fourth reason is the low rate of economic growth. We may understand this to indicate the less availability of opportunities which again translates into social disturbances.

The government must deal with these issues. The Indian economy has become like an inverted funnel that is sucking out the wealth and sending it to foreign countries. No wonder our GDP growth rate has been declining in the last six years. The Government must consider the following steps to manage these reasons of out migration.

First, the government must institute external evaluation of all senior police officers. The Fifth Pay Commission had recommended that external evaluation be got done of all Class A Officers of the Government. However this was put in cold storage at the behest of the bureaucrats. Implementation of such evaluation would provide the government with better information regarding the police officials that are more efficient in controlling crime.

Second, the Prime Minister had expressed his resolve to make Varanasi the global spiritual capital. Followers of different religions live together peacefully in countries like Malaysia and states like Kerala in our country. One reason is that the followers are more aware about the beliefs of the other religions and do not consider them antagonistic to their beliefs. The Government must establish "Indian Institute of Religions" on the lines of IITs and IIMs in each state. Departments of different religions may be stablished in these institutes so that a constructive dialogue takes place and better understanding is created between the religions.

Three, Kabir had said "Keep the critics near yourself. They clean up your temperament without soap and water." The Government must give special advertisements to those print media and TV channels that engage in constructive criticism of the Government. Such would create an atmosphere of freedom in the minds of the rich. The rich will then not be afraid and not want to migrate for this reason. Four, our GDP growth rate has been declining in the last six years. At the same time the share markets have been rising and rising. The reason of these contradictory movements is that our economic policies are supporting large businesses and making it difficult for the small businesses to survive. This policy of killing the small businesses and handing over their market to large business on a platter was supposedly made to make it attractive for the rich to stay in India. It is having exactly the opposite effect, however.

The killing of small businesses is leading to less demand in the economy, lower growth rate and less opportunities for the rich even though they may be making more profits immediately. This is like the plentiful availability of chocolates but no bread. In the end, the rich are leaving despite making profits because they do not see the economy growing.

Lastly, the government must impose an "Exit Tax" of those rich and educated who want to surrender their Indian citizenship. The United States has the provision that any person surrendering the US citizenship has to pay a huge "exit tax." The idea is that the person has benefitted from the public services of the United Sates and she must repay to the United Sates the monies spent by the US on her welfare. Large numbers of rich along with graduates of IITs and IIMs are migrating to greener pastures in foreign countries. They must be required to pay a huge exit tax. Perhaps that will dissuade some. In any event, it may provide good revenues to India to compensate for their outmigration.

(The author is former professor of

Economics at IIM, Bengaluru)