Govt measures appear to boost tax collection despite middle-class tax payers’ disappointment in terms of tax slabs

Measures, both big and small, have helped boost collections especially on the personal tax front, as well as bring more assessees under the returns filing net. The introduction of the simplified New Tax Regime and harnessing the use of technology — be it for capturing possible tax leaks or facing officers without fear of being harassed — saw noteworthy progress too.

Direct Tax Collection grew but Corporate Tax Collection dropped

On the face of it, the 10-year growth (CAGR) in total direct tax collections for the present government stands at 12.1 per cent vis-à-vis the 19.1 per cent achieved by the UPA in 2004-2014. However, this number must be seen in light of the Covid impact as well as the rationalisation in corporate tax rates around the same time. Corporate taxes were cut to 22 per cent (sans incentives) in 2019 and a 15 per cent tax rate for new manufacturing companies was announced.

Corporate tax collections dropped by 16/17 per cent each year in fiscal 2020/2021 while personal tax collections too saw only a tepid growth/mild fall in these years. In contrast, collections did see an uptick even in the global financial crisis years of the UPA.

 The simplification and transparency of the regime is one area that needs attention.  Measures to widen the tax base are another area.

 Data from the tax department shows that while the number of return filers has grown at a 10-year CAGR of 9.33 per cent from FY14, the number of taxpayers for the relevant assessment years has grown at a lower 6.6 per cent. While getting assessees to file the returns is the first step, ensuring they pay the exchequer its dues is the next.

That is, more than legal expertise, ethical consciousness needs to be deepened..

Overall, reasonable tax rates on a wider base with better compliance are the holy trinity for any government to strive for and let us be optimistic that someday, some government will achieve it.