High target, incapacity cause revenue shortfall

High target, incapacity cause revenue shortfall

Jasim Uddin | Published: 00:05, Jun 01,2018   New Age

A file photo shows the National Board of Revenue headquarters in Dhaka. The National Board of Revenue has instructed its field-level income tax offices to take legal steps against private entities which failed to submit withholding tax returns. — New Age photo

The National Board of Revenue, Bangladesh, is set to fall short of original revenue collection target for the outgoing financial year 2018, sixth consecutive year in a row, because of ambitious and unrealistic target set in the national budget and sluggish performance of some major economic indicators.
Experts and tax officials also blamed the institutional incapacity, delay in implementation of tax administration reforms and deferment of the implementation of new VAT law for the failure.
The government already cut the target by Tk 23,190 crore or about 10 per cent of the original target of Tk 2,48,190 crore following significant shortfall in revenue collection in the first 10 months of FY18.
The revised target was set at Tk 2,25,000 crore which might also be difficult to achieve because of poor growth in collection, they said.
Tax officials collected Tk 1,60,000 crore in the July-April of the current fiscal with only 12.07 per cent growth against the target of Tk 1,90,000 crore set for the period.
Revenue collection slowed down in the period compared with that of the same period of the FY17 when the growth was 19.62 per cent.
The annual growth target was set at 45 per cent on actual receipts of Tk 1,71,510 crore in FY2017 though revenue collection grew on an average 14.28 per cent in the past five years.
The revenue board needs to collect Tk 65,000 crore in May and June to meet even the revised target.
Former revenue NBR chairman Muhammad Abdul Mazid on Tuesday told New Age that the government did not consider previous year’s performance,
overall strengths of the economy and tax compliance scenario in the country while setting the revenue growth.
For example, revenue collection grew 20 per cent in FY17 but the government set much higher growth target for FY18, he said.
‘The collection target will be achievable only if the target is set in a realistic manner,’ he said.
The revenue board also had no progress in prevention of tax evasion due to lack of capacity and initiatives, he observed.
Weak tax compliance culture is also a major reason for the slow progress in revenue mobilisation, he added.
Centre for Policy Dialogue research fellow Towfiqul Islam Khan said that the target was very unrealistic and ambitious and the revenue board also failed to implement the reforms in time and as per the plan.
It is obvious that NBR will fail to meet the target considering the prevailing macroeconomic context in the country and the capacity of the revenue board, he said, adding that it would also be difficult to achieve the revised target.
A NBR high official said that the only reason behind the failure was the unrealistic target the government imposed on the tax authority.
Economic activities also were not up to the mark aligned with the revenue collection target as private investment remained almost stagnant, export grew poorly, progress of annual development programme remained sluggish and domestic trade and consumption remained slower, he said.
NBR also forecasted an additional Tk 24,000 crore in VAT collection under the new VAT law but it did not happen due to postponement of the implementation of the new law.
Despite significant increase in number of income taxpayers in the country, tax collection did not increase to that level leading to shortfall in collection for all three wings—income tax, VAT and customs duty—in July-April of FY18.
Bangladesh Bureau of Statistics, however, estimated that the economy would growth by 7.65 per cent in the year.
Private investment was estimated to increase by about 0.15 percentage points to 23.25 per cent in FY18 from 23.10 per cent in FY17.
In July-April, the government agencies could spend 52.42 per cent or Tk 82,603 crore of total ADP allocation of Tk 1,57,594 core for FY18.
Export earnings grew by 6.41 per cent in July-April but it fell short of the target by 0.30 per cent.
Though import rose significantly, it dominated by food grain import on which duty was very nominal, officials said.
They, however, expressed hope that they would be able to meet the revised target as revenue collection shot up in past two months.

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