Tax receipts keep falling as pandemic lingers

Revenue collection fell massively for the second consecutive month in May as incomes and demand for goods and services crashed because of the lengthy shutdown put in place to battle the Covid-19 pandemic.

The general closure, from March 26 to May 31, forced the National Board of Revenue (NBR) to post a negative growth in collection.

In May, it generated Tk 13,530 crore, which was 33 per cent down from Tk 20,110 crore a year ago.

The collection had crashed 50 per cent year-on-year to Tk 9,975 crore in April.   

The biggest revenue collector for the state logged Tk 188,500 crore in the July-May period of the current fiscal year, down 2 per cent from Tk 193,202 crore a year ago, showed provisional data of the NBR.

With just a month remaining of FY20, it is likely that the NBR's collection would be less than the previous year's receipt of Tk 223,892 crore. It would have to generate Tk 35,400 crore in June to equal last year's total.

In June last year when the situation was normal along with regular economic activities, the revenue board collected around Tk 31,000 crore.

So, the prospect of a collection that is higher than the previous year looks bleak under the prevailing condition. And if the NBR fails to touch last fiscal year's target, it would be the first time since 1973 that revenue collection would fall from a preceding year.

"The possibility of growth of revenue collection is unlikely," said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, a think-tank.

In a letter to Finance Secretary Abdur Rouf Talukder, NBR Chairman Abu Hena Md Rahmatul Muneem said he expected that total revenue collection might be about Tk 220,000 crore in FY20, owing to the massive fall in tax receipts caused by the pandemic and consequent stoppage of economic activities.

Until May, only income tax grew marginally while the rest two areas – value-added tax and customs tariff -- declined year on year.

VAT collection dropped to Tk 75,900 crore in the 11-month period, from Tk 76,870 crore a year ago. Collection from customs duty dipped 6 per cent to Tk 54,816 crore.

Income tax receipts stood at Tk 57,795 crore, slightly above Tk 57,670 crore generated by the segment from July to May last year, according to the NBR.

"We can expect the NBR's revenue collection in the current fiscal year to be pretty much similar to last year's," said Towfiqul Islam Khan, senior research fellow of the Centre for Policy Dialogue, also a think-tank.

"In view of the prevailing Covid-19, the NBR had little options. But at the same time, we should also remind ourselves that a lack of implementation of planned reforms and weak administrative capacity contributed to a large extent."

Revenue collection from both the NBR and other sources might fall short of the original annual target by Tk 125,000 crore, the economist said.

As the economy is reeling under the coronavirus-induced slowdown and tax collection plunged, the target for the NBR has been fixed at Tk 330,000 crore in FY21, which is 10 per cent higher from the revised target of Tk 305,500 crore in FY20.

Unfortunately, the budget for the FY21 did not consider these data while setting the revenue mobilisation target, Khan said.

"With a wide range of tax reliefs, it will not be possible to attain the NBR's revenue target in FY2021. The revenue target for the next fiscal year will need serious overhauling in view of updated real-time data."

Mansur said the NBR might be able to collect at best Tk 260,000 crore next fiscal year.

Normally, revenue generation picks up in Bangladesh as the fiscal year nears its end. In the past couple of fiscal years, the NBR posted an average revenue generation growth of 13.16 per cent.

But such growth is impracticable this time.

The pandemic may inflict a minimum revenue loss of 2 per cent of GDP, said Asian Development Bank recently.