NBR collection target may remain unchanged | The Daily Star
12:00 AM, May 09, 2021 / LAST MODIFIED: 06:32 AM, May 09, 2021

NBR collection target may remain unchanged

The government may keep its tax collection target unchanged for the National Board of Revenue in the next fiscal year because of the devastating effect of the coronavirus pandemic on the economy.   

This will be a significant shift for the government, which has set sky-high revenue generation goal for tax officials in recent years.

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Initially, the government had targeted to generate Tk 330,000 crore through the NBR in the current fiscal year of 2020-21, which was 51 per cent higher than the actual receipts of Tk 218,409 crore from the previous year.

In the face of a devastating coronavirus pandemic, which put a brake on economic activities at the height of the crisis last year, the government was forced to revise down the collection goal to Tk 301,000 crore. The revised goal is likely to remain unachieved this year as well.

The NBR's target for the next fiscal starting from July 1 may be set at Tk 330,000 crore, which is up 10 per cent from the revised target.

Zahid Hussain, a former lead economist at the World Bank's Dhaka office, termed the Tk 330,000 crore NBR revenue target as closer to reality.

"We saw ambitious revenue targets in the past, but that could not be achieved at the end of the year. From that point of view, it seems right to bring the revenue target closer to reality."

Setting any unrealistic and illogical target discourages the officials working to collect tax revenue, Hussain said.

"It is better to set a realistic target when there is a lot of risk and uncertainty over economic recovery amidst the pandemic."

As the economy was ravaged by the pandemic last year, the government did not impose any new tax in the current fiscal's budget.

The countrywide lockdown from late March to May last year to contain the spread of the virus caused severe disruptions in the economy. The second wave of infections from last month has resulted in another round of lockdown-like situations. Under the circumstances, the government may not raise the target.

In recent years, the targets for the NBR were set at 30 to 40 per cent higher year-on-year despite the widening gap between the target and actual collection.

The average growth in NBR revenue collection was 11.8 per cent in the six years to 2019-20. The highest 18 per cent growth was registered in FY2015-16.

The collection declined 2.26 per cent in 2019-20, the first negative growth in the history of Bangladesh after economic activities slumped.

Nasiruddin Ahmed, a former chairman of the NBR, however, termed the next fiscal year' tax collection target "ambitious".

"Economic activities have been facing disruption for more than a year. Where will the revenue come from when uncertainty prevails globally due to the pandemic?"

The ability of NBR is also an issue, he opined.

Zahid Hussain emphasised reforms in two issues.

The tax policy is complicated, and it needs to be simplified, the economist said. There were so many multiple rates in value-added tax, income tax, and import duty, so it is tough to apply them.

There are many chances for tax evasion, and the government is deprived of getting tax, he said, stressing the need for completing automation to increase revenue.

"Automation of VAT and income tax has remained unimplemented for long. It is not that we are building a bridge that it will take so long."

Former NBR chairman Ahmed emphasised amending the law.

The income tax ordinance was enacted in 1984. A draft for a new law was made but is yet to be passed.

There are so many exemptions in the income tax and VAT, and these need to be gradually reduced, he said.

"We need to amend the law and ensure the ability. Otherwise, the target has to be revised down later, and even that may not be achieved at the end."

Regarding the current low tax-GDP ratio, Ahmed said in a country where 82 per cent of parliament members were large businessmen, there worked a link, and the NBR officials were also involved in the process.

Revenue collection cannot be raised to the expected level under such circumstances, he said.

The World Bank in April said administrative reforms to automate VAT and income tax remained largely incomplete.

The government plans to fix an overall revenue collection target of Tk 389,000 crore in the FY22, up 3 per cent from Tk 378,000 crore in the original budget of the current fiscal year. The revised target is Tk 351,508 crore.

It plans to raise the earnings from the non-NBR segment to Tk 16,000 crore, from the current year's Tk 15,000 crore.

The government would look to earn Tk 43,000 crore from non-tax revenue, which is 30 per cent higher than Tk 33,000 crore set for FY21. In the revised budget, the target has been raised to Tk 35,500 crore.

The higher target came as state-owned enterprises have started depositing their surplus funds to the government after a law was passed in January last year, making it mandatory for them to hand over the idle and excess funds to the state coffer.

 

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