ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Direct Tax Collections Touch a 15-year High

While the collections have increased, the sharp corporate tax cuts significantly dent the resource mobilisation potential.

A recent report of the Central Board of Direct Taxes shows that the ratio of net direct taxes to gross domestic product (GDP) at current market prices has touched 6.11% in 2022–23, a 15-year high. However, this is still marginally lower than the peak net direct tax to GDP ratio of 6.3% reached in 2007–08. In fact, the net direct tax to GDP ratio has steadily decelerated by around 1.5 percentage points during the decade after the global financial crisis to reach a low of 4.78% during the pandemic. So, it is rather surprising that the net direct taxes to GDP ratio have suddenly bounced back closer to the previous peaks in the last two years.

One reason why the net direct tax to GDP ratio has bounced back is that the buoyancy of the direct taxes has suddenly shot up during the post-covid-19 recovery. It suddenly surged to 2.52 in 2021–22, which is even higher than at the peak of the global boom, as collections grew by almost half. And the buoyancy has continued, albeit in a more limited way. Consequently, the share of direct taxes in the total tax collections, which dipped from a peak of around 60% in 2009–10 to below half at the time of the pandemic, has now re-emerged as the dominant direct tax segment with a 55% share.

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Updated On : 17th Feb, 2024
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