Govt to go slow on fattening next budget

The government is likely to go slow in increasing the size of the national budget for next fiscal year owing to the sluggish pace of revenue collection. 

The size of the national budget was initially planned at more than Tk 600,000 crore. It may end up at Tk 580,000 crore for the next fiscal year, up about 11 percent year-on-year from Tk 523,190 crore in the current year, said finance ministry officials.

The issue of the total outlay for the next fiscal year came at a meeting of the fiscal coordination council headed by Finance Minister AHM Mustafa Kamal at the secretariat last week.

“With revenue receipt growth remaining sluggish, we have to rethink the size of the next budget to keep deficit within a tolerable level,” said a top finance ministry official who attended the meeting.

The GDP growth target too might see no significant hike, said the official.

Another participant of the meeting said the government was framing the 8th five-year plan for FY2021-2025 and broader macro targets which had initially been planned to be set at a higher level might be revised down because of the slow pace of tax collection.

Tax collection by the National Board of Revenue (NBR) rose 3 percent year-on-year to Tk 47,388 crore in the July-September period of FY2019-20.

The NBR, the main collector, stated to have posted 6 percent growth during the July-September period last fiscal year.

Significant gains in collection were seen in the first three years in the context of the government’s Perspective Plan 2010-2021.

The buoyancy in tax revenue later disappeared and witnessed a declining trend in the following years until FY2017, causing the tax-GDP ratio to remain below 10 percent.

The tax-GDP ratio, a measure of the capacity of the state to finance its own expenditure, was 9.2 percent in FY2019.

The government assigned the NBR to collect Tk 296,201 crore in taxes last fiscal year, which was 46 percent higher than the actual collection in the previous year.

The tax authority said it ended up posting a collection growth rate of 11 percent last fiscal year.

At the meeting, the finance minister expressed annoyance over the sluggish pace of revenue collection in the current year.

He inquired the NBR about reasons behind the delay in installation of electronic sales register machines, also called Electronic Fiscal Device (EFD), at stores and various other businesses, scanners at ports and hiring of additional manpower.

Responding to journalists’ queries last Wednesday regarding the slow pace of revenue collection, Kamal blamed low collection of value added tax.

“I was assured that EFDs will be installed in shops from July 1. Unfortunately, it did not happen. Collection will increase once the devices are installed,” he said.

At the fiscal coordination meeting, the NBR blamed tax breaks, exemptions and discounts in various sectors for the low collection.