Econ 101 informs that indirect tax incidence is higher on the poor and therefore are regressive and encourages a greater share of national tax revenues come from direct taxes. However, in countries like India revenues from indirect taxes are almost equal to that from direct taxes (in 2021-22, direct tax to GDP ratio was 6.1%, compared to 5.6% for indirect taxes).
A new Oxfam report has a hugely informative table on what proportion of indirect taxes is contributed by different income categories.
As a corollary, the share of income spent on indirect taxes is orders of magnitude higher for the bottom half compared to the top decile.
The report also points to high levels of wealth inequality in India
By 2020, the income share of bottom 50% was estimated to have fallen to only 13 per cent of the national income and have less than 3 per cent of the total wealth... This is in stark contrast to the top 30 per cent who own more than 90 per cent of the total wealth. Among them, the top 10 per cent own more than 80 per cent of the concentrated wealth. The wealthiest 10 per cent own more than 72 per cent of the total wealth, the top 5 per cent own nearly 62 per cent of the total wealth, and the top 1 per cent own nearly 40.6 per cent of the total wealth in India.
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