New Tax Data - Biggest Losers of Demonetisation - Large Corporates?

Yesterday, the Income Tax department released detailed statistics for AY 2016-17 and AY 2017-18 (Financial years 2015-16 and FY 2016-17). AY 2017-18 pertains to the Demonetisation year.

You can access the data here

In this article I produce data as available on the web-site. You can disagree with my conclusion by putting forth your arguments. I should be glad to learn and change my opinion. Here we go

Total Tax Payers

AY 2015-16 - 2,03,21,441 (Page 81)

AY 2016-17 - 2,33,03,993 (Page 79)

AY 2017-18 (Demonetisation Year) - 2,22,64,570 (Page 79)

Unless we are missing something, total tax payers data shows a fall in the demonetisation year.

It is fascinating that in the year of demonetisation, total tax payers actually fell

Let us look at total returns filed

Total returns Filed

AY 2015-16 - 4,35,99,192 (Page 18)

AY 2016-17 - 4,94,87,559 (Page 19)

AY 2017-18 (Demonetisation Year) - 4,98,68,380 (Page 15)

It is fascinating that in the year of demonetisation, total tax payers went up by just 0.8%

(Original Article said, returns filed had fallen in AY 2017-18, corrected now)

Let us now finally look at Total Tax Liability

Total Tax Liability

AY 2015-16 - 549279 (Page 7)

AY 2016-17 - 623710 (Page 6) - Increase by 13.6%

AY 2017-18 (Demonetisation Year) - 717687 (Page 15) - Increase by 15%

So, while Tax payer data does not show a surge, Tax liability certainly went up during demonetisation year. Question is, which group was responsible for this bounce?

Personal Income Taxes (Individual, HUF, Firm, AOP/BOI)

AY 2015-16 - 216893 (Page 7)

AY 2016-17 - 266889 (Page 6) - Increase by 23%

AY 2017-18 (Demonetisation Year) - 311182 (Page 15) - Increase by 16.6%

Clearly, the Tax liability bounce is not coming from Personal Income Taxes. It is coming from corporate taxes.

Corporate Taxes growth went up from 9% to 12%. Let us now look at corporate taxes in greater detail

< 5 crores Tax to be paid - 2015-16 growth - 7.2%, 2016-17 growth - 10%

> 5 crores to <=100 crores - 2015-16 growth - 11.8%, 2016-17 growth - 11.7%

100 crores to <=500 crores - 2015-16 growth - 12%, 2016-17 growth - 13.6%

>500 crores - 2015-16 growth - 7.3%, 2016-17 growth - 12.4%

The biggest losers appear to be those at the top end > 500 crores taxes to be paid. This is probably because number of companies with > 500 crores revenues went up by 5.2% growth in 2015-16 to a massive 12.8% growth in 2016-17 (Demonetisation year). Two hypothesis

a. Either most tax evasion occurred amongst these larger companies and they reported higher revenues in the demonetisation year (A sustainable logic)

b. Or, these companies gained share from smaller companies that lost out due to dealing with cash transactions

Looking at RBI data 2015-16 and 2016-17 of large corporate suggests that hypothesis A is true ( Revenue growth was higher in 2016-17 compared to 2015-16 though GDP growth was higher in 2015-16)

What about Individuals?

All above statistics shows a slowdown in Taxes and returns in the demonetisation year as far as Individuals are concerned. So the source of the budget statistics below is unclear (atleast I was unable to trace the source)

Tax Collections (Other than Corporates - In Crores)

2014-15 - 238074

2015-16 - 270312 - Growth of 13.5%

2016-17 - 324421 - Growth of 20%

In Sum

It is clear that Tax evasion probably occurred the most in larger corporates and Demonetisation perhaps scared the hell out of them leading to better tax collections.

The scenario amongst individuals is unclear as the data from the Income Tax department shows a slowdown while the data from the finance ministry shows a significant bounce. Let us say we are looking for more information as far as Finance Ministry data is concerned. Anybody who knows more, please share.

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