Strongly disapproving the idea of inheritance tax, Reserve Bank Governor Raghuram Rajan has advocated a "cultural change" which pulls the rich towards philanthropy or giving back to the society.
"I would argue rather than a blanket inheritance tax, let's change the culture. Make it such that people don't want to leave a lot of wealth for their children," he said while delivering the keynote address at DD Kosambi Festival of Ideas in Panaji over the weekend.
Specifically speaking on inheritance tax idea, he said: "I think rather than bringing people down, our focus should be on taking people up.
"How do we give opportunity to many more people? Inheritance tax only helps the lawyers in the society," he said. "A dramatic estate tax generates value for lawyers as they figure out ways to hide the estate so that it does not get taxed," he said.
His views come amidst some voices seeking an inheritance tax in the forthcoming Budget, which would mean people may have to pay for inheriting a priced property. According to the votaries, this ensures the society ceases being aristocratic.
Pointing to the larger play of philanthropies in the Western corporate world, Dr Rajan said the Western world has a better way of dealing with the issue, which is to "shame" the rich into devoting wealth for good causes.
"One thing the West does very well is to shame them into giving it away so that they feel that they are participating in it of their own will. It is a good way, as now they want to make money because they like to give it away later."
Citing the example of John D Rockefeller, Dr Rajan said that even though the oil magnate made his wealth in an "awful" way, he did a lot good to the mankind though his philanthropic efforts like the University of Chicago and a centre for medical research.
The central bankers also said the system must "incentivise" the people to create wealth, which in turn has a spillover effect in form of job creation, and stressed that the country needs to respect that for some people leaving some wealth for the kids would be a priority.