The Financial Express
Doulot Akter Mala | June 24, 2020
The government’s revenue collection in the current fiscal year is likely to contract for the first time since the country’s independence in 1971.
The slump in tax collection as the fallout of the coronavirus pandemic may result in lower taxation to GDP or gross domestic product ratio.
Until May of the 2020 fiscal, receipt by the National Board of Revenue or NBR shrank 2.43 per cent from the same period a year earlier, according to provisional data.
April-June is deemed the peak period for revenue collection when the tax authority collects the bulk.
In the first 11 months to May, the revenue shortfall reached Tk 762.51 billion against the revised target.
During July-April, the amount was slightly lower than Tk 620 billion.
Though the revenue collection posted a mere growth of 0.64 per cent until April, May closed in the red.
The tax-GDP ratio at less than 10 per cent, Bangladesh is the least-taxed in South Asia.
The ratio is 23.1 per cent in Nepal, 16.8 per cent in India and 11.0 per cent in Pakistan.
The United Nations Conference on Trade and Development or UNCTAD, in its recent report, said Bangladesh’s tax-GDP ratio is significantly lower than the LDC average.
The seventh five-year plan (2016-20), the General Economics Division of the planning ministry projected 14.5 per cent tax-GDP ratio this year, but it is on track to miss the target, acknowledged the division’s member Dr Shamsul Alam.
He said the GED has prepared a draft with the new target of taxation to GDP, investment, etc, which will be disclosed by July next.
“I cannot disclose this right now as it needs the approval from the ministries concerned,” he said.
There is no alternative to lifting the country’s tax-GDP to generate domestic funds, he argued.
The country must strengthen its economic muscles to graduate to a developing country status by 2024.
He stressed the need for undergoing required reform to boost revenue collection.
NBR officials, however, cursed luck, saying the pandemic came at the peak time of the revenue collection.
“We collect a major portion of revenue in the last quarter of a fiscal year. The implementation of the government’s development work and an increase in import contribute to the revenue as source taxes,” an official said.
Although the taxmen have geared up VAT collection effort in June, there will still be a huge shortfall, he said.
The official said the NBR has yet to have any idea on the volume of shortfall against revenue collection target this year.
He said businesses are also facing difficulties to survive in the pandemic so the taxmen would not pile additional pressure on them to collect revenue.
The original target for the NBR was Tk 3.25 trillion for FY 2019-20, which has been revised to Tk 3.0 trillion.
The government has set Tk 3.30 trillion target for NBR in the upcoming fiscal.
In a letter to the finance ministry, NBR chairman Abu Hena Mohammad Rahmatul Muneem said achieving the revised target seems “quite impossible” in the current situation.
He projected a maximum tax collection of Tk 2.20 trillion, down from Tk 2.34 trillion the year before.
With the revenue collection growth averaging 14 per cent in the last five years, he projected Tk 2.50 trillion tax collection in FY 21.
Dr K.A.S Murshid, director general of the state think-tank Bangladesh Institute of Development Studies, however, said the GDP growth may face a blow due to COVID-19 so the tax-GDP ratio might go down significantly on proportionate rates.
He said there is no scope for being optimistic without carrying out required reform.
In the current budget, the government revised GDP growth for FY 2019-20 downward to 5.2 per cent from 8.2 per cent target as COVID-induced economic shutdowns stung.
Of the three wings, income and travel tax collection missed the target by 45.82 per cent, followed by customs 35.68 and VAT 30.11 per cent.