Originally posted in The Daily Star on 15 May 2023
National Budget FY2023-24
Tax target likely to be missed for the 11th year
The tax collection growth fell further in April, making it tougher for the National Board of Revenue (NBR) to attain its goal of raising Tk 370,000 crore in the current fiscal year.
And two research agencies warned that the target would once again remain unachieved.
The revenue administration collected Tk 247,390 crore in the 10 months to April of 2022-23, which was 67 per cent of the target for the entire financial year, according to the provisional data of the NBR.
This means taxmen will have to collect Tk 122,600 crore in the remaining two months of the year ending in June.
“The target is likely to be missed,” said MA Razzaque, director of the PRI Study Center on Domestic Resource Mobilisation, at a press briefing in Dhaka yesterday.
The amount of shortfall would be around Tk 54,600 crore in FY23, he said.
If the economist’s projection turns into reality, this would be the 11th consecutive year the NBR, which collects more than 85 per cent of the state’s total revenue, would miss the tax collection targets set by the government, data from the finance ministry showed.
The Centre for Policy Dialogue (CPD) earlier projected that the overall revenue collection shortfall from the government’s target would be approximately Tk 75,000 crore if the current trend of revenue mobilisation persists.
The Policy Research Institute of Bangladesh (PRI) said the tax authority is also likely to lag behind the tax collection target of Tk 345,630 crore given by the International Monetary Fund (IMF) as a part of its $4.7 billion loans.
CPD Executive Director Fahmida Khatun said the normal record of the NBR is that tax targets remain unattained.
“We are going to see that again. There is a capacity issue of the NBR. The tax net is not expanding while the implementation of the reforms has been sluggish.”
Economic factors also affect revenue collection.
“The economy is not recovering fully. Businesses are yet to rebound from the coronavirus pandemic and they are now facing the fallout of the war in Ukraine,” Fahmida said.
The NBR, which saw a recovery in tax collection following the reopening of the economies after the lifting of Covid curbs, recorded only 6 per cent growth in tax collection in the July-April period of FY3. It was 15 per cent during the identical period a year ago.
NBR data showed that tax collection from international trade grew only 1.68 per cent year-on-year to Tk 74,230 crore in July-April owing to falling imports.
Income tax receipts rose 3.15 per cent to Tk 78,058 crore.
Value-added tax, the biggest source of collection, has been the major driver of collection. The indirect tax receipts grew 12 per cent to Tk 95,100 crore.
PRI’s Razzaque said there has been a continuing stagnation in NBR revenue growth in comparison with the growth of gross domestic product (GDP).
Revenue earned as a percentage of the GDP from VAT and import duty has deteriorated in 2021-22 compared to 2009-10.
However, there has been a slightly positive impact on income tax, the economist added.
In the next fiscal year, which starts in July, the NBR is likely to be given the task of collecting Tk 430,000, which is 16 per cent higher than the current fiscal year’s revenue target.
Razzaque said the overall collection might be around Tk 310,000 crore to Tk 315,000 crore in FY23.
“As such, the goal will be steeper and it will be extremely difficult to achieve the target in the next fiscal year.”
Fahmida is equally doubtful.
“Without reform and capacity-building and institutional strengthening, the target will not be achieved within a year unless there is any magic.”
In Bangladesh, tax revenue remained among the lowest in the world at an estimated 7.6 per cent of GDP in FY22, according to the World Bank.