When it comes to budgeting, there are some revenue streams that are linked with broader growth in the economy. These include the goods and services tax (GST), which is a consumption-based tax, corporate tax, which is linked to the profitability of companies, and customs duty, which is driven by imports.

The actual flows are contingent on how these elements perform and are thus beyond the government’s control. True, better compliance has been witnessed in the past, thanks to better systems being put in place. But beyond a point, such flows tend to plateau out.

Therefore, the government needs to look at new avenues of taxation within this framework. Surcharges and cesses, levies that have often been used, could be applied to these new areas. Three ideas, borrowed partly from Thomas Piketty’s dogma of taxing the rich more, can be pursued.

Two of them follow that logic, while the third would leverage the success of the Unified Payments Interface (UPI) to garner revenue.

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The first idea is in the realm of luxury. Today, it is well accepted that while there may be rural or urban distress, the rich are never affected by economic conditions. So, can we think of a luxury tax or surcharge that will not burden the taxpayer nor reduce demand for the product or service taxed?

To be fair to the affluent, income and wealth are generated with progressive taxes paid along the way. Hence, it would not be right to tax the same directly again.

But all new purchases can be brought under a ‘luxury surcharge,’ which may be analogous to the income tax surcharge on incomes above ₹50 lakh per annum. It can be imposed at the time of purchase (and not on income).

Hence, a house costing more than, say, ₹10 crore could carry a surcharge of 5%. This rate can go higher as the price crosses ₹20 crore. It is not uncommon to hear of business executives and celebrities purchasing luxury homes priced above ₹100 crore.

While it is true that the stamp duty on these purchases is paid on a progressive scale, the luxury surcharge would go to the Centre, unlike the former, which goes to states.

Similarly, a stay in a hotel room costing above ₹50,000 per day can be subjected to a similar surcharge of 5-20% depending on the underlying value. Air travel by business class or first class could bear a luxury tax besides GST, as these services are usually used by the affluent or on business accounts.

This logic can be extended to celebrity endorsements, where deals can exceed ₹100 crore. As this is about brand marketing and goodwill generation, a luxury surcharge would not deter companies from signing such deals. A surcharge could also be levied on sportspersons who have been earning large sums in tournaments that do not involve playing for the nation.

The second idea is one that has been spoken about for long but was never implemented: taxing agriculture. Here, picking up from Piketty, it would be easy to target affluent landlords.

An annual cess can be levied on large holdings of 10-20 hectares (and above) based on the value of the property as defined by the state (circle rates are an example in urban areas). This will not affect small farmers and only cover rich landlords.

As per the Agriculture Census of 2015-16, there were around 146 million holdings in the country, of which 838,000 were classified as large, adding up to just 1.4%. Bringing this class under a large-holding cess would augment government revenues.

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The third idea that could be looked at involves leveraging UPI data. This platform has become a favoured mode of payment for even small transactions.

Payments through this digital system are accepted more or less everywhere in India, including by street vendors. All UPI transactions are linked to bank accounts, which in turn are identifiable by people’s PAN numbers.

By running an algorithm, the government can procure information on the earnings of all UPI payment recipients. This can help draw up a list of those who received payments above a specified threshold of say ₹20 lakh in a year (this would broadly put them in the bracket of income tax payers after adjusting for expenses).

Intuitively, this group of UPI users with high receipts could be sent tax notices.

It should be noted that several street vendors do business which could cross ₹5,000 a day, but may not be in the tax net as they are in the unorganized sector.

The Indian tax system has evolved over the years, with Form 26AS and AIS capturing virtually all transactions via bank accounts, including ones as little as ₹1 earned by way of a share dividend. UPI data can be analyzed in detail to assess potential tax liability.

GST has helped bring about greater formalization in the economy, which in turn has resulted in higher tax collections. But there is still a large segment of informal businesses that could potentially pay its fair share of taxes. This is a project that the government should take up.

It is important for the government to keep exploring new avenues for earning revenue. There are several segments that remain outside the tax dragnet’s reach and should be included.

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A tax based on the UPI database may not result in large collections, but will ensure that a trail is established and would lead to higher collections in the future. It is not what Piketty had in mind, but if combined with a luxury surcharge, it could add to the country’s budgetary resources.

The author is chief economist, Bank of Baroda, and author of ‘Corporate Quirks: The darker side of the sun’

Agriculture Income Tax

India should take cues from Piketty on enlarging its tax mop-up