August 24, 2021 Sujeev Shakya

Impose inheritance tax to change politics

Family feuds generally revolve around ancestral assets in the form of land and property.

The splitting of political parties is being widely discussed in Nepal as if it is something alien to societal norms. However, the way political parties behave is a reflection of the society we live in. Our societies have always seen family feuds, and they generally revolve around ancestral assets in the form of land and property—land being the biggest of them. It is rare to see a family where there has been no family feud for assets in the past three generations. We grew up learning how my grandfather’s family took away the family assets, and our dad and his brothers were on their own. When it happened again, we stopped speaking to one of my uncles after he took away all the assets and left us with nothing.

We siblings thought it was important to start off on our own rather than fight for the family assets, and now we do not think that was a bad idea. I am not sure how my life would have been if I had assets I had inherited and could live on the rental income. Would my siblings or I been as hardworking and push ourselves hard? Our society is one where lives revolve around inheritance. Earlier, women were excluded from inheriting parental property by law. No wonder Nepali women are more hardworking than Nepali men as they are not sure they will inherit wealth from their parents or husbands.

Weddings and funerals

Fights for family assets, especially land, form part of every discussion at large family gatherings. We remember weddings and funerals where there were showdowns between different families. I have vivid memories of people fighting over who should light the funeral pyre at cremation ghats as society determines family relations based on who attends funerals and lights the pyre. You will see warring brothers fighting for family wealth together as kriya putra (mourning sons) even though they may not be on speaking terms. It is not rare to see brothers who have had fist fights in front of hundreds sitting together at death rituals. Family members fighting in court for decades can be seen posting large obituaries in the newspapers. They all do that as there is inheritance to look forward to. The disintegration of wealth amongst Rana families, perhaps the richest rulers in South Asia, can be attributed to fights for assets across different branches of the family. Only those who chose to get professionals or kept family communications open and legal have survived.

This sense of fighting within families is reflected in our political parties. It is rare to see a political party that has not had such fights. Even the new ones have fights as the leadership of the party is seen as legitimate inheritance, which means that they are like family members fighting over inheritance.

If one has inherited a plot of land, especially in urban centres in Nepal, the usual practice is to rent it out. With sky-rocketing land prices, there are many Nepali billionaires in terms of land value. There is no incentive to become entrepreneurial. They start businesses because everyone is doing it. They do not have to think hard as the business is for identity; and if it folds up, it’s not your hard-earned money that you have lost. Some ancestor earned it for you. Therefore, it is important to tax inheritance in a big way so that what comes to one is not guaranteed, and you have to work hard early on in life like in many countries in the world.

People ask why second generation Nepali children in the United States are so successful, or some of the young people who have started businesses in the ICT sector in Nepal have flourished, and the answer for the majority would be the same. They started on their own without inheritance or moved away from their families to be independent. If we did a survey of women (daughters or daughters-in-law) below 30 years of age, many would say they would choose independent nuclear living instead of being in families where in exchange for inheritance, you have to trade your independence.

More open spaces

Japan and South Korea’s economic growth can be attributed to their 55 percent and 50 percent inheritance tax respectively as people do not wait for their parents to die to inherit their wealth. Of course, there has to be a threshold above which this should apply. Further, making a will and registering it with competent authorities should be made mandatory for everyone who owns assets, like we have to name a nominee for bank accounts and shares of companies in the event of death. This will also reduce the number of litigation after the death of the asset owner.

In Nepal, a high inheritance tax can also lead to more open spaces. With more Nepalis settling abroad, the assets in Nepal become just another bonus for them. So if there is inheritance tax, they would not mind if the local government takes over their assets and gives them the money after taxes. In Boulder, Colorado, the local government buys such houses and dismantles them, creates more open spaces and increases the prices of houses in the neighbourhood, resulting in more taxes. In Patan, we see so many abandoned houses in clusters which are mostly disputed. They can be taken over to create open creative spaces that can also generate revenue.

It is important to look at this issue deeply if we are to resolve our political landscape in the next decade. We need to have the next generation of political leaders push the cause of inheritance taxes to secure their own political future. Otherwise, in the 22nd century, we will be talking about the 150 years of different party splits and unification like in families.