To counter increasing evidence that demonetisation may have dented the Indian economy, the government has put out a series of statistics to show that the contentious move to scrap Rs. 500 and Rs. 1,000 banknotes last November has improved economic health, specifically by expanding India’s tax base.
The latest Economic Survey says 5.4 lakh new taxpayers were added after the notes ban, an increase of 45 per cent over last year.
In a press conference earlier this year on the successes of the government’s “clean money” drive, Finance Minister Arun Jaitely earlier had said that 91 lakh new taxpayers were added. No time period was specified, leading some to infer that those numbers were added after the notes ban.
The release mentioned, amongst other successes, a 41 per cent increase in advance tax collections.
Faced with criticism that it was putting out conflicting, cherry-picked data, the government issued a fresh press release on August 18, arguing that the numbers were not contradictory, but culled from different time periods.
While it indeed does appear to be the case, an examination of each of those claims doesn’t address the wider questions over whether demonetisation, which wiped out 86 per cent of currency in circulation, has indeed led to a tax “surge”.
First, the claim mentioned in the Prime Minister’s speech that the number of returns filed by individuals is up 56 lakh from about 2.23 crore returns last year, to 2.8 crore this year, a rise of 25 per cent. The period in question is cited as April 1, 2017 to August 5, 2017.
However, looking at annual figures from previous years shows nothing unusual about the 25 per cent increase.
In financial year (FY) 2015, the number of returns were up 15.3 per cent over the previous year; in FY 2016, that rose to 4.1 crores, a 27 per cent jump.
The claim by the Economic Survey of 5.4 lakh additional taxpayers after demonetisation – and increase of 45 per cent over the previous year – also does not appear significant when seen in light of overall data.
According to the government, the figure is from the period 9th November 2016 to 31st March 2017.
The Survey itself accepts that this is 1 per cent of all new taxpayers
In 2014-15, 76 lakh new tax payers were added, Finance Ministry data shows. That figure fell to 63.5 lakh the following year and in 2016-17, it climbed to 80.7 lakhs, according to the Economic Survey.
Where matters become confusing is over the Finance Minister’s claim of 91 lakh new taxpayers.
NDTV had reported earlier that this figure was not for the period after demonetisation, but the entire year.
The latest government release accepts this. However, the Economic Survey cites a different number – 80.7 lakh new taxpayers – for the same period.
The release explains the contradiction by saying that the Survey is using a different period and different type of taxpayers.
The Survey, however, clearly states that the number is of new individual taxpayers for 2016-17.