FT Online

2019-05-19 14:28:43 BdST

July-March tax collection growth lowest in decade

The overall tax collection fell short of the target by over half a trillion taka in the last three quarters of the current fiscal year.

The total tax revenue collection, however, registered a 7.11 per cent growth during the July-March period of FY 2018-19 over the same period of the last fiscal, according to provisional official figures.

They largely blamed ambitious target, slow growth of import revenue, and ad-hoc tax exemptions for the deficit.

Until March, the National Board of Revenue (NBR) collected Tk 1.53 trillion tax revenue against its target for Tk 2.03 trillion for the period.

The total revenue collection target for the National Board of Revenue (NBR) has been set at Tk 2.96 trillion for FY 2018-19.

To achieve the target, the tax authority will have to collect Tk 1.43 trillion more during the last quarter (April-June) of the fiscal.

Dr Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh (PRI), cited slowdown in import and lack of reform initiatives as the two reasons for the large revenue shortfall.

According to Bangladesh Bank data, the country's overall import of consumer goods plummeted by 31.41 per cent to $3.63 billion in the first eight months from $5.30 billion in the same period last year.

Also, the import of capital machinery fell by more than 7.0 per cent to $3.25 billion during the period.

The central bank data said the opening of letters of credit (LCs), generally known as import orders, dropped by nearly 22 per cent to $39.27 billion during the period, which was $50.20 billion in the same period last year.

Dr Mansur, however, expressed his doubt over any positive outcome from implementation of the new VAT law as the government framed it in a "compromising manner."

He said the ad-hoc intervention of the policy makers in offering tax exemptions worsened the revenue shortfall.

About achieving the ambitious target, he said the government has set the revenue collection target without taking the ground reality into account.

He questioned the growth figure the government disclosed, saying it is not reflected on the revenue collection position.

"The government claims that the country has attained 19.5 per cent growth in manufacturing. This growth must have a direct impact on the VAT collection," he said.

A senior NBR official said exemptions ate up a significant part of the tax collection this year.

Tax collection from the gas sector is one of the major sources for revenue, but the government waived taxes to give consumers a relief, he said.

The NBR also cut source tax from the readymade garment exporters in the middle of the current fiscal, which hampered tax collection, he added.

The revenue collection target for the current fiscal has been set estimating the significant amount of revenue from those sectors, he said.

According to the research and statistics wing of NBR, the government set the current fiscal's target expecting a 43.50 per cent growth over that of the last year.

In the last fiscal, the NBR collected Tk 2.06 trillion tax revenue when taxation to GDP (gross domestic product) ratio was 9.28 per cent.

The government has targeted achieving 13. 32 per cent tax-GDP ratio in the current fiscal, said an annual report of the research wing.

Officials said achieving such an ambitious growth is difficult without overhauling the existing tax administration, executing the expansion plan and introducing automation.

The rates of tax revenue collection growth were 20.24 per cent in FY 2017-18; 11.74 per cent in FY 2016-17; 13.21 in FY 2015-16; and 12.32 in FY 2014-15.

In July-March period, the VAT wing collected Tk 601.18 billion, while the income tax and customs arms garnered Tk 463.17 billion and Tk 469.30 billion respectively.

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