A constructive debate has opened up with regard to the imposition of the long-term capital gains (LTCG) tax (goo.gl\/CyXAE7). In my article \u201cThe Little Revenue LTCG tax\u201d, I reached the following two conclusions. First, that based on historical data on capital gains, and as made available to the public by the ministry of finance (MoF) for the fiscal years 2011-12 through 2014-15 on their website (goo.gl\/oYCLLn), the new LTCG tax was unlikely to yield much tax revenue, and, therefore, was not recommended. Second, that increased discretion on the part of the taxman maybe counter-productive to governance. The CBDT has questioned my conclusions, and in the spirit of a healthy debate, I question their conclusions. Regarding the governance, the CBDT states that worry about governance issues with the imposition of the LTCG tax may be misplaced. For example, \u201ctaxpayers are generally familiar with the LTCG regime including the mechanism for indexing the cost of acquisition w.r.t inflation. The new regime for LTCG proposed in the Finance Bill, 2018 has been designed in a similar manner\u2026This computation process does not involve any discretion on the part of the taxman.\u201d As stated in my article, my belief remains that anytime, any computation of taxable income, and, therefore, tax, is subject to interpretation, it can (does?) lead to governance problems. This is true for all countries, and for all times, and has been recognised by policymakers around the world. And, as I have consistently argued over the last nearly 20 years, tax compliance in India is unnaturally low\u2014a natural corollary is that the governance problems are large. Why increase such problems by imposing the LTCG tax? One of the major gains from demonetisation, in my view, was that tax compliance would increase. I take comfort from the fact that in the first full year post-demonetisation (FY18), personal income tax revenues are extraordinarily buoyant. But, we still have a long way to go for full tax compliance. The latter can be defined as a compliance level similar to the US, where for the past decade, personal income tax revenue is 82% of what it \u201cshould\u201d be; where 100 is the amount collected if everyone is an honest taxpayer. Even in the \u201cimproved\u201d compliance year 2017-18, my estimates suggest that we are, at best, around half the US level, i.e., that we are collecting only 35-40% of the revenue we should be collecting. A large part of the CBDT disagreement with my computations of little potential revenue in FY17 has to do with how stock gains are estimated. The normal academic practice is to assume that stock sales (and buys) are distributed randomly (at a collective all individual level) throughout the financial year, i.e., each day has an equal probability of sales. Under this assumption, the capital gain for any year is the average change in the index for that year. This yields a stock market gain for FY17 of only 3.9%\u2014average Sensex level of 26,312 in FY16 and average level of 27,338 in FY17. The CBDT calculates the gain based on the first trading day of FY17 (25,301) and the last trading day (29,620) and obtains a gain of 17.1%. Their Sensex figures for the stated days are correct, as are mine for the average change in the Sensex. We differ on whether the change in the average is a more accurate measure of gains in a particular year, or whether it is more meaningful to assume that all stocks were sold on the last trading day of the year. The CBDT has more data, and as I stated in my article, I do not question the MoF claim that stocks sold in 2016-17, and exempt from capital gains tax (because they represented sales of stocks held for more than one year), were Rs 3.67 lakh crore. I use the capital gains data from earlier years, as reported on the MoF website, to suggest that such a large magnitude of stock sales and exemption claimed, is not something that can happen in a normal low-average gain year. My interpretation of the LTCG reported for all categories (property, gold, stocks) reported on the MoF website for the earlier years (2011-12 \u2013 2014-15) is that total capital gains reported include capital gains for stocks, but that no tax on stock gains was collected because the LTCG tax was 0 %. For example, in 2014-15, a year when the average gain in the Sensex was a high 32%, all LTCG income reported (stocks, property, gold) was as little as Rs 0.845 lakh crore\u2014or less than a quarter of what was reported in 2016-17 on an average gain of just 4%. (Incidentally, the loss set-off, for 2014-15 was Rs 0.58 lakh crore, resulting in taxable capital gains income of just Rs 0.26 lakh crore in this 30+ sensex gain year) There is a genuine \u201cmystery\u201d about why the CBDT figures of LTCG exempt gains are as high as Rs 3.67 lakh crore. My explanation, as offered in my article, was that 2016-17 was the year of demonetisation, and that may have caused reported gains to be much larger than the underlying reality. The CBDT is absolutely correct in stating that it was not the Kelkar 2002 task force that recommended the abolishment of the LTCG tax. It was done by the UPA government in 2004. However, the bureaucratic MoF team making the recommendations (Vijay Kelkar, Arbind Modi, Ajay Shah and myself as a pro bono consultant) was the same. It is very likely that the Kelkar 2002 report on direct taxes, which estimated the loss in LTCG tax of Rs 1,000 crore, obtained these calculations from the CBDT itself. So, whether, and to what extent, indexation was involved, and what the relevant tax rate was (10% or 20%), is difficult to measure at this stage. However, regardless, we have a firm estimate of Rs 1,000 crore lost because of the implementation of a zero LTCG tax in 2002 at a tax rate of 20%. How much would gains be today is difficult to estimate without up-to-date and more detailed data on profits and losses in the stock market. The MoF has these data, and it will be very useful if such data is released so that we can have a constructive debate on the pros and cons of any given policy on taxation. What is clear from the limited publicly available data on LTCG is that LTCG tax revenue will, in all probability, be less than Rs 10,000 crore in future years; incidentally, that is the same that the government automatically gets, regardless of market movements, computation and governance issues, from the present securities transaction tax. So what purpose is achieved by imposition of the LTCG tax?