Demonetisation behind buoyancy in tax collections: RBI MPC member

NEW DELHI: RBI Monetary Policy Committee (MPC) member Ashima Goyal has attributed the rise in tax collections to demonetisation and said it will help the nation move towards the ideal situation where low taxes are levied on a large base.

On November 8, 2016, Prime Minister Narendra Modi announced the demonetisation of old Rs 1,000 and Rs 500 banknotes and one of the key objectives of the unprecedented decision was to curb black money flows and promote digital payments.

Noting that demonetisation had short-term costs but some long-term benefits, Goyal said it enhanced digitisation and formalization in the economy and reduced tax evasion, although all this has further to go. “It contributed to the buoyancy in taxes the country is benefitting from today. This helps us move towards the ideal of low tax rates on a large base,” she said.

The tax department on October 9 said that the gross collection of tax on corporate and individual earnings jumped nearly 24 per cent so far in the current fiscal year to Rs 8.98 lakh crore.

GST collections remained above Rs 1.40 lakh crore for the seventh month in a row at Rs 1.47 lakh crore in September, a 26 per cent increase over last year, reflecting buoyancy in tax collection.

However, earlier this month former Congress president Rahul Gandhi said that the BJP’s policies of demonetisation, GST and farm laws are weapons aimed at India’s poor and small businessmen.

To a question on Central Bank Digital Currency (CBDC), Goyal said the objectives of the CBDC are to reduce the use of cash, and provide additional functions to the existing payment system rather than replace it.

“CBDC can certainly meet new needs in the digital age, reach remote areas and enhance financial inclusion, and save costs since cash is expensive and cumbersome,” she noted.