The problem of tax buoyancy

For two successive years, the sanctity of the Budget’s tax revenue numbers presented to Parliament as the Revised Estimate (RE) has been destroyed. The actual net tax revenue collections in 2018-19 fell short of the RE numbers by Rs 1.67 trillion, or 0.9 per cent of gross domestic product (GDP). The shortfall in 2019-20 is a little lower at Rs 1.49 trillion, or 0.7 per cent of GDP. Such large deviations, as brought out in detail in an earlier article, are a cause for deep concern. Worse, they undermine everyone’s trust in the Budget numbers and can mislead policy-makers into .....

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