The shortfall from revenue collection target has widened further in the first eight months of the fiscal year as collection of the National Board of Revenue did not pick up.
The NBR logged in Tk 126,357 crore as revenue in July-February, up 16 percent year-on-year.
The overall receipt was Tk 17,512 crore short of the target of Tk 143,869 crore set for the period.
The revenue collector missed the target in January by Tk 14,802 crore, according to preliminary data from the NBR.
It was apprehended that the NBR’s revenue collection for the ongoing fiscal year would be below the annual target of Tk 248,190 crore, said Towfiqul Islam Khan, research fellow of the Centre for Policy Dialogue.
“However, the attained growth, which is less than that of previous year, is lower than expected. The NBR’s revenue mobilisation has not kept pace with official estimates of GDP growth that is set to hit a record, he said.
During the period, tariff collection from imports rose 16 percent to Tk 40,129 crore on the back of the 25 percent growth in imports in the July-January period of the fiscal year. As a result, shortfall from import tariff collection target was the lowest out of three divisions of revenue collection: customs, VAT from businesses and income tax.
“The staggering import growth has helped this year’s revenue collection,” Khan said.
The deficits of VAT and income tax collection from targets were Tk 6,941 crore and Tk 6,996 crore respectively.
Between July last year and February this year, VAT collection soared 18 percent year-on-year to Tk 49,078 crore and income tax receipts 13 percent to Tk 37,149 crore.
“Regrettably, income tax collection is not impressive at a time when income inequality has been on the rise amid stellar economic growth performance. Indeed, more efforts will be required to curb tax evasion,” Khan added. Income tax receipts will rise 20 percent by the end of the fiscal year, said Zia Uddin Mahmood, NBR Member for Tax Administration and Human Resource Management.
Khan went on to state that it is critical for the government to revise the annual target for the ongoing fiscal year in a pragmatic manner.
The current revenue collection goal is 34 percent higher than NBR’s claimed collection of Tk 185,003 crore last year.
Economists on several occasions in the past had flagged the revenue collection target to be ambitious.
The target would not be achieved owing to the NBR’s capacity constraints, evasion and sluggish pace of reforms.
The NBR registered 14 percent annual growth in tax collection in the last five years.
“As the entire reforms agenda in the area of revenue mobilisation has apparently been shelved in view of the forthcoming national election, the government should not be overambitious while setting the revenue collection target for the next fiscal year,” Khan said.
Hopefully, reforms related to revenue mobilisation will find their due place in the election manifestoes of the major political parties, he added.
Last week, the South Asian Network on Economic Modelling in its quarterly review of Bangladesh economy said the low revenue mobilisation through taxes and poor performance in income tax generation are two key challenges for fiscal 2018-19’s budget.
In the case of tax composition, a lack of improvement can be noticed over the past few years, it said.
VAT has been the prime source of tax revenue, followed by income tax. But the proportionate contribution of income tax has been quite low in comparison to other south Asian countries.
The research organisation said Bangladesh needs to drastically improve its performance in terms of revenue mobilisation through increased tax generation efforts.
Abdur Rouf, director general of the NBR’s research and statistics department, said collection will pick up in the last four months of the fiscal year owing to increase in spending for development works.
“Historically, we have seen that revenue receipts go up in the last quarter and the last month of the year,” he said, while expecting the NBR’s collection to rise 20 percent at the end of the fiscal year.
In view of the situation, the government is likely to revise down the current year’s tax collection target for the NBR.
The goal may be fixed within Tk 225,000 crore, according to an official of the finance ministry.