# The Predictive Grey Forecasting Approach for Measuring Tax Collection
## 2 Literature Review and Conceptual Framework
### Contribution of Direct Tax to Total Tax Revenue  
Taxes levied and paid on income or wealth are called direct taxes because they are progressive. Indirect taxes are considered more regressive, as they are not directly imposed on the individual but on the consumption of goods and services. Personal liability and indirect trade measures encourage concerns about vat-based taxes discouraging businesses from growing.  
In India, total tax revenue has steadily increased, suggesting economic progress and increasing tax compliance ([PERSON], 2019). Direct taxes have generally increased, with minor changes, and account for a sizable share of total tax revenue. Income, corporate, and wealth taxes are direct taxes levied directly on individuals or entities. In contrast,indirect taxes include the goods and services tax (GST), excise duty, customs duty, and other consumption-based taxes. Direct taxes' percentage of total tax revenue has gradually increased, demonstrating the growing importance of personal and corporate income taxes. However, rather than raising tax collection, narrowing the tax gap is a more widely acknowledged solution ([PERSON], 2019). Reducing the tax gap means lowering the gap between potential and actual tax collection.  
Direct taxes provided around 36% of overall tax revenue in the fiscal year of 2000-01, increasing to 54.62% in the fiscal year of 2022-23 (Figure 2). Direct tax contributions have consistently ranged between 36% and 60%. Direct taxes made the greatest contribution in 2009-10, accounting for 60.78% of total taxable income. Changes in tax rates, tax changes, economic conditions, and compliance procedures can all have an impact on direct tax contributions. Changes in tax policies, such as the implementation of GST in 2017-18, may have influenced the relative proportions of direct and indirect taxes in certain years.  
There have also been decreases in contributions coming from direct tax payments for a longer period, covering years of 2021 and 2022, which are mainly attributed to the disruption of the economy by the pandemic. The reduction in economic activities and poor profits of corporations could have temporarily influenced the amount of direct taxes paid. However, it must be underlined that the more comprehensive treatment of tax revenues can account for other parameters, including but not limited to tax rates, holidays, tax credits, and collected tax as a fraction of GDP. Even so, the provided data are quite valuable, as they indicate how the proportion of direct taxes relative to total collection has changed in India over the years.  
The increase in direct tax revenue indicates that people and businesses are earning more income and making profits. As demonstrated by the financial year of 2022-23, efforts to make tax administration more efficient are also needed, as well as the development of measures against tax evasion. Experts in the field of tax policy can rely upon this  
Figure 2: Contribution of direct tax to total tax revenue (Source: author calculation using data from CBDT database, CBIC).  
information to ascertain the efficiency or inefficiency of such policies, make necessary changes, and balance the level and structure of taxation.