Close the gap

As the tax-GDP ratio tends to fall again, the taxman should set eyes on areas where profits accrue

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WITH THE CENTRE'S gross tax revenues (GTR) in the first seven months of FY26 growing by just 4%, analysts fear full year collections could fall short of Budget Estimates (BE) by as much as 1.5 lakh crore, or about 3.5%. This would mark a significant setback to the government's effort to narrow the widening "tax gap" by raising the tax-to-GDP ratio. In recent years, the Centre had managed a modest improvement in this ratio-from 11.3% in FY23 to 11.7% in FY25—but it now appears poised to slip again, well short of the 12.1% peak achieved in FY08, which the Budget had hoped to approach. If the medium to-long-term objective is to lift combined tax revenues of the Centre and states from roughly 18% of GDP to a more desirable 25%, both tiers of government will need to sustain tax growth well above the pace of GDP expansion before stabilisation can occur.