New Delhi: India’s tax department recorded a huge spike in the number of ‘stop filers’ – a term that refers to individuals who filed returns in the earlier years but did not do so in the current year – in the same financial year as demonetisation, according to a media report.
A report published in The Indian Express claims that in 2016-17, the number of ‘stop filers’ shot up by 10-fold to 88.04 lakh from 8.56 lakh in 2015-16. These numbers do not include taxpayers who may have passed away in that year or whose PAN cards had been cancelled or surrendered.
“This is the highest increase in almost two decades since 2000-01,” the report noted, quoting unnamed tax officials. “The number of stop filers was consistently falling from 37.54 lakh in fiscal 2013 to 27.02 lakh in fiscal 2014, 16.32 lakh in fiscal 2015 and 8.56 lakh in fiscal 2016.”
What explains the rise in the number of such filers?
One reason, as the report notes, is that the spike could have come as a result of job losses or reduced economic activity and income-generating activities in the wake of demonetisation.
The Indian Express quotes a separate unidentified tax official as saying as that mere changes in compliance behaviour – people specifically choosing not to file returns even though they were liable to do so – could not explain the rise.
“Typically, the number of stop filers reflects a compliance and enforcement gap, which the tax administration fails to enforce…The spike could be due to a fall in income or loss of jobs during the year,” the report said, quoting the official.
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Tax data also shows that there was a steep decline in the number of TDS (tax deducted at source) deductees, with a drop of more than 33 lakh people, who did not file returns in the past.
This, the report says, is more evidence that there was a fall in economic activity in 2016-17.
Experts say that this data presents another piece to the tax puzzle presented by demonetisation. It is, in a way, at odds with the narrative that has been put forth by the Narendra Modi government so far – namely that demonetisation was a net positive effect when it concerned tax buoyancy and compliance.