///Govt should focus on income-tax collection to address inequalities: Towfiqul Islam Khan

Govt should focus on income-tax collection to address inequalities: Towfiqul Islam Khan

2018-01-16T12:34:28+00:00 January 16th, 2018|CPD in the Media, Towfiqul Islam Khan|

Published in The Financial Express on Tuesday, 16 January 2018

Revenue growth may remain well below the target this fiscal

H1 collection short of target by Tk 126.21b for slower economic activity

Doulot Akter Mala

Growth in this fiscal’s government tax-revenue collection may decline substantially, economists predict, as the first-half receipts fell short of target by Tk 126.21 billion.

They read a reflection of slower economic activity of the country in the tax-target shortfall during the first half (H1) of the current Fiscal Year (FY).

Also, they smell a rat in the mismatch between lower revenue receipt and substantially higher imports.

Tax evasion and money laundering through invoice tampering are suspected as among reasons for the imbalances.

The shortfall is almost equivalent to the half of the direct-tax collection in the same period last year.

Tax-revenue collection by the National Board of Revenue (NBR) posted lower growth, 15.38 per cent, in the July-December period compared to that of the corresponding period last year. In the first half of the FY 2016-17, the NBR had achieved 17.78 per cent growth in tax-revenue collection.

Provisional figures in the NBR revealed the major shortfall in the internal revenue collection in the first six months of the current fiscal year.

Officials said the shortfall could figure at Tk 100 billion in the final calculation the collection data by end of this January 2018.

Economists find the growth belie their expectation although the aggregate revenue-collection target is an “ambitious” one.

The government has set the target in the budget eying 35 per cent growth but actual growth would be 17 to maximum 19 per cent this year as per the present economic context, says Dr Ahsan H Mansur, Executive Director of the Policy Research Institute (PRI).

“The sluggish trend in the tax-revenue collection shows that the economy is not growing well. Economic activity is not boosted that much as shown,” he said, on a note of scepticism over the government-projected growth scenario.

He feels the revenue-collection figure is not justifying government estimates on the economic growth.

The government eyes an economic growth of 7.8 per cent in the ongoing FY 2017-18. However, the World Bank (WB) recently relegated the GDP growth to 6.4 per cent for this fiscal. Higher growth in imports is one of the major indicators of revenue-collection growth. However, the economist sees a mismatch here.

“Increased import of products could not leave any significant impact on tax-revenue collection in the H1,” Dr Mansur said.

He mentioned that import grew by 29 per cent this year compared to corresponding 9.0 per cent last year. “It indicates duty-free import is increasing. There might be capital flight through over-invoicing,” he said.

The policy researcher underscored the need for reform to ramp up the revenue-collection growth. Although the finance minister recently said he would not revise the revenue target on a large scale this year, Dr Mansur suggested bringing it down targeting 18 to 19 per cent growth over the corresponding year. According to the provisional figure of the NBR, its income-tax wing posted a poor growth compared to that of two other wings.

In the H1, import- export-revenue collection grew by 19.12 per cent and value-added tax (VAT) 14.10 per cent.

The government has set the aggregate revenue target at Tk 2.48 trillion for the FY 2017-18 hoping for an additional Tk 200 billion through implementation of the new VAT and Supplementary Duty (SD) Act 2012 from July 1, 2017. However, the new law has been put on the backburner, through its deferment for two years to 2019, following strong opposition from the businesses.

In the July-December period, VAT collection lagged behind its target by 14.04 per cent. The VAT wing collected Tk 348.07 billion against its target for Tk 404.92 billion.

Collection of income tax and travel tax also missed their target by Tk 48.61 billion in the July-December period.

Research Fellow at the Center for Policy Dialogue (CPD) Towfiqul Islam Khan said the government should lay emphasis on income-tax collection to address inequalities.

Slow growth in VAT collection was anticipated due to non-implementation of the new VAT law, but the income-tax wing could not meet the expectation, he added. Import of food-grains, intermediate goods and capital machinery increased, but a sharp growth in cotton import is suspicious, Mr Islam said.

“The NBR and the central bank need to closely monitor the issue,” he said.

Revenue collection could be increased through checking duty and tax evasions, the economist further suggested.

He also suggested that the NBR recover the disputed amounts of revenues from the state-owned enterprises (SoEs) through Alternative Dispute Resolution (ADR) mechanism. The aggregate tax-revenue-collection target was Tk 1.05 trillion for H1 but the NBR could manage Tk 925.32 billion in that period, missing the mark by 12 per cent.

Comments

Leave A Comment