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SUNDAY, MAY 28, 2023
Revenue generation shows little sign of recovery

Bangladesh

Abbas Uddin Noyon
09 September, 2020, 10:55 pm
Last modified: 10 September, 2020, 09:43 am

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Revenue generation shows little sign of recovery

In July-August this year, the government collected 30.06% less than the target set for this period

Abbas Uddin Noyon
09 September, 2020, 10:55 pm
Last modified: 10 September, 2020, 09:43 am

The government's effort to revive the economy by lifting the countrywide Covid-19 shutdown has failed on the revenue front as the first two fiscal months have fared dismally.

Revenue collection by the National Board of Revenue (NBR) fell short of its target for the two months by 30.06%.

According to sources at the National Board of Revenue (NBR), Tk28,635 crore was collected in revenue in these two months.

Due to a fall in the consumption level, VAT collection from goods and services alone fell by 15% year-on-year in the July-August period of this year.

Analysts are of the opinion that even though external trade has normalised, domestic economic activities are still far behind normal. As people's income and consumption have decreased, revenue collection is declining instead of increasing.

Dr Mustafizur Rahman, an economist and distinguished fellow at the Centre for Policy Dialogue, said the country's economy has not yet returned to normalcy.

The fear of the new coronavirus is still working in people's minds, he noted, adding that both income and consumption of the people have decreased.

"Recovery in the service sector will take much longer. This has been reflected in the revenue collection figures," he argued.

A review of the data has shown that the VAT sector has suffered the most in the first two months of the current financial year.

Revenue collection from the consumption-dependent VAT sector saw an over 15% decline in this period when compared the corresponding period of the last year.

Meanwhile, the revenue of Tk9,887 crore, collected as VAT in the July-August period of this year was around 38% less than the target of Tk15,464 crore set for these two months. The deficit in revenue collection from this sector in the period stood at Tk5,577 crore.

However, the government, targeting automation, has declared the VAT sector as the main source of revenue.

Like VAT, the income tax sector is also in a sorry state because of a drop in the people's income.

In spite of setting a relatively small target of collecting Tk10,020 crore in revenue in the first two months of the ongoing fiscal year, the income tax sector lagged behind by Tk1,217 crore.

The sector registered negative 2% growth in July-August this year as compared to the same period of last year, although the NBR deducts about 85% from the taxpayers' bank accounts as income tax at source.

The NBR saw a rather positive situation in the collection of revenue in import duties in July this year, after imports had been suspended for many days due to the Covid-19 pandemic. However, revenue collection from the sector witnessed a downward trend again the following month.

In July-August this year, Tk9,945 crore was collected in import duties against a target of Tk15,262 crore. The sector fulfilled 65% of its tax collection target in those two months. In the same period of the last year, Tk9,557 crore was collected in import duties.

A customs commissioner, speaking on condition of anonymity, said customs houses did better than other sectors, as some products from previous orders were imported in July.

Although the government has reopened the economy, a decline in people's income and a slowdown in economic activities have led to lower revenue collection, said NBR officials.

Mohammad Abdul Mazid, former chairman of the NBR, however, blamed it on the revenue board lagging behind in required reforms for poor revenue collection.

The pandemic alone cannot be blamed for the huge deficit in revenue collection in the first two months of the fiscal year, he said.

"The target was set in line with the plan to automate the revenue collection process. The NBR's failure to complete the reform activities has led to the deficit," he said.

Although the entire economy came to a grinding halt due to the novel coronavirus outbreak, the NBR has been given a target to collect Tk330,000 crore in FY2020-21; aiming for about 33% growth compared to last year.

Out of this, Tk128,873 crore has been targeted to be collected from the VAT sector. Additionally, the income tax sector has been given a target of Tk105,475 crore, and a target of collecting Tk95,652 crore in revenue has been set for customs.

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