Development financing to slow down: Unnayan Onneshan

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The decline in growth rate in total revenue collection in recent times together with the existing low tax-gross domestic product (GDP) ratio is likely to slow financing for development, warns Unnayan Onneshan (UO), a multidisciplinary think tank.

In the latest edition of its monthly publication, the Bangladesh Economic Update, the UO noted that the rate of growth in revenue mobilisation has declined since FY 2011-12.

Then actual mobilisation of total revenue grew by 19.3 percent in FY 2011-12, whereas the rate of growth decline in the subsequent years stood at 15.2 percent, 10.4 percent, 13.5 percent, and 13.8 percent in FY 2012-13, FY 2013-14, FY 2014-15, and FY 2015-16 respectively.

Besides, it is estimated that Bangladesh has the potential to increase the mobilisation of its revenue up to 22 percent of gross domestic product (GDP) whereas the total revenue mobilisation as percentage of GDP stood at 10.89 percent, 11.65 percent, 11.66 percent, 10.78 percent, and 10.26 percent in FY 2011-12, FY 2012-13, FY 2013-14, FY 2014-15 and FY 2015-16 respectively.

The average revenue mobilisation as percentage of GDP during the last four years stood at 11 percent in Bangladesh compared to 20 percent in India, 19 percent in Nepal, 14 percent in Pakistan, and 13 percent in Sri Lanka, shows the Bangladesh Economic Update.

According to the latest statistics, the total revenue collection in the first month of the current fiscal year (July 2016) has stood at Tk 9,594.14 crore against the total target of Tk 2,03,152 crore for the whole fiscal. Taking account of the previous years’ trend, the UO forecasts that the total collection of revenue may fall short of the target by Tk 30,000 crore in the current fiscal year.

The think tank shows that the collection of total tax revenue as percentage of GDP has been declining since FY 2012-13. The total tax revenue as percentage of GDP stood at 9.74 percent, 9.69 percent, 9.28 percent, and 8.98 percent in FY 2012-13, FY 2013-14, FY 2014-15, and FY 2015-16 respectively.

The total tax revenue grew by 23.3 percent in FY 2012-13, 11.43 percent in FY 2013-14, 8.06 percent in FY 2014-15, and 10.47 percent in FY 2015-16 while non-tax revenue grew by 2.54 percent, 15.96 percent, negative 14.34 percent, and negative 3.06 percent respectively during the corresponding period.

Taking account of the unsatisfactory performance in income tax collection which is proposed to be the largest source of revenue and critical to the total revenue mobilisation, the think tank evinced that the rate of growth in collection of income tax has been on the decline since FY 2012-13.

The rate of growth in collection of income tax was calculated at 31.35 percent in FY 2012-13. However, the growth in collection of income tax in the subsequent years declined to 15.61 percent, 13.07 percent, and 9.89 percent in FY 2013-14, FY 2014-15, and FY 2015-16 respectively.

The research organisation further demonstrated that the rate of growth in collection of Value Added Tax (VAT) had assumed a somewhat declining trend in recent times. Growth in the collection of VAT – both at local and import level – stood at 18.37 percent in FY 2011-12, 15.26 percent in FY 2012-13, 8.15 percent in FY 2013-14, 12.11 percent in FY 2014-15, and 10.96 percent in FY 2015-16.

Source: Prothom Alo