Who pays taxes and who doesn't -Ram Singh

-The Hindu

The number of tax returns filed has gone up but collections have not shown a commensurate increase

The Central Board of Direct Taxes has released the latest data on income tax collections. Several interesting facts emerge from the data. The number of taxpayers has increased drastically over the last four years. The number of tax returns filed has surged to 6.85 crore in FY 2017-18, an 80% growth since FY 2013-14. Also, the number of taxpayers reporting income greater than ?1 crore has reached 1,40,139, an increase of 60% between assessment year (AY) 2014-15 and 2017-18.

However, the tax collections have not shown commensurate increase. Collections have grown at a decent compound rate of about 13% per annum. More surprisingly, the average income reported by rich Indians (those in the highest tax slab) has decreased. In fact, over the last five years, the share of the richest top 1% in the total tax collected has decreased by almost four percentage points. The same is the case with the top 5% income earners (graph 1). In contrast, relatively low income groups are paying a larger proportion of the tax collected. How can this be, given that the number of taxpayers has increased across all the tax slabs and more individuals report income in crores than ever before (graph 2)?

 

 

Under-reporting still a concern

While for the low tax slabs, the average reported income has also increased, this is not the case with high income groups. After 2016, the average income reported by those in the highest tax slab is 13% less than their average just before 2016. Apparently, a number of high-income individuals (HIIs) grossly under-report their income. Clearly, the Income Declaration Scheme of 2016 and other official measures announced to stem tax evasion by the rich have failed to achieve the desired results.

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