Despite record low growth, NBR sets massive target

The National Board of Revenue (NBR) has set a massive 42 percent tax collection growth for the current fiscal year despite witnessing a meager 9.4 percent growth in the previous fiscal year, record low in a decade.

According to the Integrated Budget and Accounting System (IBAS) database, the NBR collected Tk223,892 crore in taxes during 2018-19 fiscal year, falling behind its stipulated target by Tk72,000 crore.

The NBR fell short of its projected target of 32 percent.

Previously the growth dipped to 10.7 percent in 2013-14 due to strikes and blockades caused by countrywide political turmoil. The NBR had been witnessing an average annual growth in tax collection to the tune of 14 percent since FY2013-14.

The NBR was given 16 percent growth target considering the previous fiscal year’s target as a base. But as there was huge deficit in FY2018-19’s target, the present tax collection target has crossed all previous records.

To achieve Tk325,000 crore target, the NBR will now have to achieve more than 42 percent growth.

NBR Chairman and Internal Resources Division’s Senior Secretary Mosharraf Hossain Bhuiyan, however, thinks the NBR can reach the target by legal reform, additional manpower and strengthening activities at field level.

“Income tax has been given the highest importance in achieving the revenue target. In the current fiscal year 6.72 lakh new taxpayers will be added. To this end 213 audit committees have already been formed and surveys were started,” he said.

Mosharraf added that 7 lakh business firms will be fitted with electronic fiscal devices (EFD) in two years to bring the VAT department under automation.

Which sectors lagged behind the most?

According to NBR sources, supplementary and import duty exemptions in sectors such as mega projects, big businesses, and gas are partly responsible for the deficit in tax collection in the previous fiscal year. Several experts, however, believe that the deficit was caused by the incapability of the NBR.

On Tuesday, NBR Chairman Mosharraf Hossain Bhuiyan at a press conference said: “VAT exemption in the gas sector has contributed to a Tk15,000 crore deficit in tax collection target last fiscal year. The import of consumer goods has also gone down.”

According to sources concerned, no new taxes were imposed in the previous fiscal year as it was an election year.

Meanwhile, tax exemptions granted to sectors such as gas, internet, export-oriented RMG, housing, solar module, tourism, and computer accessories also contributed to the failure to reach tax collection target.

A total of Tk63,000 crore in taxes was earned from customs duty on imports and exports, against a target of Tk80,000 crore in the last fiscal year.

This sector contributed only 28.3 percent of the total revenue earning and the growth rate was only 4 percent.

Commenting on the issue, the NBR chairman said: “In 2017-18 fiscal year, the growth in consumer goods import was 26 percent. In the latest fiscal year, it slid below 6 percent.”

The income tax sector is also lagging behind as only Tk72,000 crore in revenue was collected against a target of Tk105,000 crore. The growth is 11 percent with a deficit of about Tk33,000 crore.

Mosharraf said the lag was caused by the corporate tax rate cut and tax waiver given to the mega projects.

About 40 percent of the total revenue came from VAT in the latest fiscal year. The government earned Tk87,610 crore from VAT in the previous fiscal year. Growth in the sector was 9.87 percent.

The NBR chairman, however, believes that the revenue collection from VAT should have been more.

“Our revenue collection is less than the GDP growth. Still VAT is a big source of our revenue earnings. In the last fiscal year expected revenue could not be collected from the sector as online VAT was not implemented,” said the NBR chairman.

What do experts say?

Several economists consider such low tax collection growth in the previous fiscal year as a big negative signal for the economy. They opined that with no mechanism 42 percent growth can be achieved in the current fiscal year.

“The target of revenue growth can in no way be matched with the economic growth. If the size of economy increases, the revenue earnings will go up. I think either the NBR has capacity deficiency or they mistook in calculating economic growth,” Ahsan H Mansur, executive director of the Policy Research Institute, told The Business Standard.

He further added: “In the current fiscal year, no such revolution will take place in the country’s economy that 42 percent growth can be achieved.

“The government has given a big budget to show a big number. At the end of the year, there will be a big deficit in revenue collection. Alongside there will be a big deficit in the budget implementation too.”