Sam Pitroda had played a uniquely seminal role in his earlier years as advisor to Rajiv Gandhi. He had mooted the idea of five mission modes for modernisation of India, of which Telecom Mission had worked as a transformation agent.

Pitroda had set up the C-Dot (Centre for Development of Telematics), which undertook research and development projects for extending telecom services to remote areas in the country. In those early days, C-Dot had done some fundamental research on telecoms applications specific to Indian conditions which were uniquely relevant.

The subsequent liberalisation of the telecoms sectors, scrapping of the monopoly choke hold of the ministry of telecommunication on telecoms services had allowed the blossoming of telecom revolution in the country. Without the opening up of the telecoms sector the next best thing, the IT revolution and India’s emergence as an IT superpower, could not have come about.

Since those days, Satyendra Govardhandas Pitroda, better known as Sam, had gone back to his native America. These early sparkles —some forty years back—from Sam Pitroda had worked their bit and now Sam is seeking to regain that old prominence, but with old ideas.

It will be unfair to lightly discard Sam Pitroda today for some ideas which maybe out of sync with present day aspirations of the country. He was merely taking forward an idea which Rahul Gandhi had mooted in course of his election speeches about income inequality in the country. If there is widespread inequality why not attack it at once at the roots.

But such an idea militates against present day zeitgeist. An inheritance tax, or often known as death day, is one such.

In a moribund static world, where the game is always “I win, you lose” kind, there is some appeal for such ideas. In a dynamic growing scenario, where fresh opportunities are emerging, where the game is always “Win-Win” solutions, such ideas go out of the window.

The concept of an inherence tax is attractive for the state as it stands to gain from the accumulated savings of individuals. But that acts as a disincentive for the savers and investors. Consider present-day start-up gurus and the successful technology Czars of present day. How will they react to a death duty. There are examples when the death duty has not worked very well.

Britain had an inheritance tax or estate duty. As a result, none of the owners of traditional properties could retain their holdings after the death of a scion. At successive stages these savings vanished. To bail out the bankrupt property owners, Britain had to set up a National Trust to take over assets from old families. They had gone bankrupt after paying inheritance tax.

But the effort was not worth its while, because the revenue yields were not commensurate with the administration of estate duty. In this country, to avoid paying estate duty, owners of large states had created legal fictions for continuing ownership of assets. Trusts were the preferred vehicle. Hindu undivided families also had some usefulness. For the old families, creation of trusts in the name of family deity was also a widespread practice.

The disadvantage of such a system of known tax evasion is that huge estates are locked up in legal fictions and over years these tend to decay otherwise. The beneficial owners are no longer able to use their assets in any form for productive purposes.

Instead of encouraging such legal fictions, it is far better to leave the estates to the descendants. At any rate, honesty speaking, the descendants for large fortunes fritter away the accumulated assets over next two generations. This has the socially beneficial impact in so far as money and assets keep circulating rather than being locked up.

The concept of an inheritance tax is associated with a “socialistic pattern of society”. In its extreme form, its underlying philosophy was the Communist principle of communal ownership of all productive assets of a society. The experiment was tried in the Soviet Union and Mao’s China where all productive assets belonged to the state.

These ideas have played havoc with economies of countries at various stages. Stalin’s introduction of communes and scrapping of land rights and individual farms —the collective farms— had led to massive shortfalls in agricultural production and ensuing starvation deaths.

The idea of an estates duty is particularly abhorrent in India. A patrimony here is considered a natural process. Any interference with that would be detested, as it used to be when the duty was in force. A death tax, for all you know, might result in a flurry of philantrophy in the guise of which the beneficial owners would continue to enjoy. Why not come clean?

A death tax, for all you know, might result in a flurry of philanthropy in the guise of which the beneficial owners would continue to enjoy. Why not come clean. (IPA Service)