State coffer was topping up nicely before outbreak | The Daily Star
12:00 AM, March 29, 2020 / LAST MODIFIED: 12:00 AM, March 29, 2020

State coffer was topping up nicely before outbreak

crore in the first eight months of the fiscal year aided by healthy income tax generation but the shortfall against the government target has kept widening.

Between the months of July last year and February this year, the National Board of Revenue (NBR) had aimed to generate Tk 189,823 crore in taxes.

Income tax collection rose 14.54 per cent year-on-year to Tk 44,624 crore during the period, provisional data from the NBR showed. 

Value-added tax (VAT), which is paid by consumers, went up 7.83 per cent to Tk 56,953 crore. The indirect tax is the biggest source of revenue for the NBR.

Import tariff edged up 2.90 per cent to Tk 42,837 crore.

But in all three areas, the NBR has failed to hit the targets set for the period.

Collections from income tax was 22.77 per cent short, import tariff 28.88 per cent and VAT 20.69 per cent.

The NBR has been tasked with mobilising Tk 325,600 crore this fiscal year, up 45 per cent from fiscal 2018-19's actual collections.

Amid the sluggish collection, the government had already started thinking of trimming the target by Tk 20,000 crore. That was before the coronavirus outbreak.

Now, because of looming COVID-19 threats, which has ground the economy to a halt, the NBR may need to shave the target by a bigger amount, said a tax official.

"The coronavirus hasn't impacted revenue generation as of February. The effect would be clear from March onwards," he said. 

In Bangladesh, the first confirmed cases came on March 8.

Revenue shortfall in fiscal 2018-19 was Tk 87,402 crore. If the ongoing trend continues, total revenue shortfall this year may reach Tk 100,000 crore, according to the Centre for Policy Dialogue (CPD).

In order to slow the spread of the virus, the government has already locked down the country, shutting offices and educational institutions and limiting the movement of transport and people.

Most businesses have come to a standstill and export and import activities have been hit hard.

Uncertainty in the global economy and consequent repercussions for the Bangladesh economy may create added pressure on revenue mobilisation during the remainder of the fiscal year and beyond.

Downturn in trade, particularly that of import values may result in considerably lower collection of revenue from customs duty, VAT and supplementary duty (SD) at the import stage.

In view of the added uncertainty and increased medical expenditure in case of a massive outbreak and job loss and lower income, particularly in the informal sector, households may also spend less, the CPD said in a paper on March 21.

And a prolonged epidemic may result in a slump in business activities, which, in turn, could trigger lower collection of VAT, SD and income (both corporate and personal) tax at the local stage, it said.    Total revenue-GDP ratio in fiscal 2018-19 was merely 9.9 per cent and the tax-GDP ratio only 8.9 per cent, which is amongst the lowest in the world.

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