Why are wealth taxes and gift taxes treated as paper taxes in India?
Show answer & explanation
Correct answer: A
Explanation
The correct answer is Option 1 i.e. They do not generate much revenue in comparison to others.
Wealth tax and gift tax in India are often referred to as paper taxes because their contribution to the government’s overall revenue collection is very minimal compared to other major taxes like income tax or GST. The cost of administering and collecting these taxes often outweighed the benefits they generated. Due to this limited practical utility, they were seen more on records than in reality. Eventually, wealth tax was abolished in 2015, highlighting its inefficiency in revenue mobilisation.