Economic recovery to get priority in the next budget
Seventy percent of NBR’s Tk3.30 lakh crore revenue target for next year will come from VAT, import duty and indirect tax
There will be some programmes in the upcoming budget for 2020-21 to recover the economy from the coronavirus effects and to rehabilitate affected industries and poor people.
Also, strategies will be set to increase revenue collection by not increasing tax burden on health, agriculture and rural development.
The decisions were made at a meeting on Tuesday to discuss the next budget with Prime Minister Sheikh Hasina at her office. Finance Minister AHM Mustafa Kamal, and top officials of the Finance Division, the National Board of Revenue (NBR) and the Bangladesh Bank were present at the meeting.
Finance Division officials said programmes for increasing rural employment were recommended in the budget. Also, agriculture mechanisation to ensure food security by increasing agricultural production was recommended. Decreasing corporate tax rate outside the implementation of the stimulus packages was recommended to revive industry and service sectors.
A Finance Division official said the size of the budget, revenue collection situation and other overall economic subjects were discussed at the meeting.
He said the size of the budget can be Tk5.60 lakh crore and the revenue collection target can be Tk3.95 lakh crore.
Of this, Tk3.30 lakh crore can be targeted from tax under the NBR, and Tk65,000 crore from tax outside the NBR and revenue sectors without tax.
The finance ministry expects to get Tk5,000 crore foreign donation in next fiscal year. Budget deficit can cross Tk1.60 lakh crore.
The Finance Division official said although the budget size was discussed at the meeting, nothing was final.
It was the first budget meeting with the prime minister and there would be more, he said.
"We are collecting stakeholders' opinions on the budget till May 12. After that, everything will be made final by considering the coronavirus situation, he added.
In the running fiscal year, Tk523,190 crore was the size of the main budget.
Of this, the target was fixed to earn Tk377,810 crore from tax under NBR, tax outside NBR and revenue sectors without tax. Foreign donation target was Tk4,168 crore. Deficit without donation target was Tk145,380 crore.
Officials who were present at the meeting said next fiscal year's GDP growth had not been estimated yet. Running fiscal year's growth cannot be estimated for coronavirus. After getting primary information from the statistics bureau next week, the growth target will be fixed based on that.
NBR officials said targets were being fixed to increase revenue income from indirect tax by decreasing tax burden next fiscal year.
Seventy percent of NBR's Tk3.30 lakh crore revenue target for next year will come from VAT, import duty and indirect tax. Extra income target of Tk27,000 crore from indirect tax has been fixed by decreasing income tax earnings target by Tk10,000 crore than running fiscal year.
The fresh target is 10 percent more than the revised target for the current fiscal year. Among the NBR targets, Tk1.28 trillion will be collected from the VAT sector, Tk1.05 trillion from the income tax sector and Tk96,000 crore from the customs.
The VAT sector will provide 38.78 percent of the total revenue collection while the VAT collection target is 36.11 percent against the total revenue collection in the current fiscal.
The income tax collection target has been set at 31.81 percent against the total collection while it is 35.50 percent in the current fiscal year.
The revenue collection target from VAT and customs has been set at Tk2.27 trillion – nearly 70 percent to the total collection target. However, the amount in current fiscal year is 64.5 percent of the total revenue collection.
Policy Research Institute Executive Director Dr Ahsan H Mansur believes the dependency in indirect taxes is acceptable considering the virus crisis.
"Collection from the corporate sector in the next fiscal year will drop as businesses have sustained a major blow owing to the pandemic. Therefore, collection should be switched to VAT or customs from income tax," he told The Business Standard.
Meantime, NBR sources said that the collection target in the income tax sector has been slashed as concern grows over profit of the major sectors. On the other hand, there is no plan to levy new charges on customs and VAT. Chase for the additional targets can be met through a comprehensive online payment system.
"The NBR will not levy any new or extra VAT though the collection target for the sector will be hiked," A VAT policy official of the revenue board told The Business Standard.
The official said they will ramp up collection through enhanced field enforcement and ensuring online VAT collection.
The revenue collection target was fixed at Tk3.25 trillion with a 33 percent growth than the current year. The target was revised to Tk3 trillion.
The NBR collected Tk1.65 trillion with eight percent growth in the first nine months of this current fiscal year. The tax authority collected Tk2.23 trillion in the 2018-19 fiscal year.