Tax growth exposes forecasting inaccuracies

THE estimates of FY22 tax revenue versus actual collections until last week shows the government's poor fiscal marksmanship, or the accuracy of budget forecasting, to some extent.

- SUNITHA NATTI

The revised budget estimates pegged gross tax revenue growth at 24.1% for FY22. But the first three quarters (AprilDecember 2021) had already clocked in a 44.2% increase, which means, the revised estimates imply that gross tax revenue will decline by 14.8% in Q4, as per an RBI article titled Union Budget 2022-23: Some pleasant fiscal arithmetic, released last week.

This, despite the historical norm of receiving significant proportion of tax revenue (33.2% on average with a y-o-y growth of 12%) in the last quarter of any given fiscal year.

Based on actual tax collections data for April-January FY22, revised estimates suggest an implicit decline of 18.4% in gross tax revenue during the months of February and March 2022, while the implicit decline in corporation tax, income tax, GST, customs duty and excise duty works out to 29.2%, 26.5%, 2.3%, and 20.7%, respectively, the article noted.