Tax revenues may remain robust in 2024-25 as well
Financial Express Mumbai|January 03, 2024
Widening tax base, enforcement behind high H1 buoyancy
PRIYANSH VERMA
  • NOMINAL GDP IN H2 WILL LIKELY GROW AT A HIGHER PACE

MULTI-YEAR-HIGH TAX buoyancy recorded in the first half of FY24 by the Centre raises questions about how much of the spurt is attributable to higher revenue productivity, and the use of the implicit price deflator.

Statistically, the buoyancy of a tax system gauges the overall responsiveness of tax revenue to variations in the GDP, and deliberate adjustments in tax policies over time.

Policymakers have traditionally interpreted it as the percentage variation in revenue linked to a one percent change in GDP growth in nominal terms.

The ratio is significant, as typically if the tax buoyancy is below 1, it denotes the government would resort to raising revenue through other means - either non-tax revenue or market borrowing.

Generally, over the longer run, it's expected that tax buoyancy is equal to one.

"If the tax buoyancy is 1 (that's if the nominal GDP and tax collections both grow at the same pace), it means that the tax system is efficient as generating revenue in parallel to the growth being generated," said DK Pant, chief economist, India Ratings and Research.

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