No respite from tax burden for common people as govt targets indirect sector again

The government is setting an indirect tax-based revenue target for the next fiscal year by reducing the income tax target, meaning tax burden on common people will not decrease even if big corporations get concessions.

According to sources at the National Board of Revenue, the finance ministry has set a revenue target of Tk3.3 trillion for the 2020-21 fiscal year, almost 70 percent of which will be extracted from the indirect sector.

In the next fiscal year, the indirect tax target is going to increase by at least Tk27,000 crore from that of the current fiscal year. On the other hand, the income tax target is reducing by Tk10,000 crore.

As indirect taxes are levied directly on consumers, all people have to pay equal taxes. The government collects it during sales and import of goods and services. As a result, the taxes are equal for both the rich and the poor, affecting the latter more. 

Experts say it is a bad decision to increase tax collection targets instead of discounts at the consumer level during the present coronavirus pandemic.

Golam Rahman, chairman of the Consumers Association of Bangladesh, told The Business Standard, "Due to a rise in the target, the collection will also have to be increased. As a result, the pressure on ordinary people will increase."

He further said that an equal tax rate for both the rich and the poor is an inequality. All countries in the world collect more than 50 percent of the revenue from direct taxes. In some countries, it is up to 70-80 percent.

According to finance ministry sources, a target to raise Tk3.30 trillion in taxes through the revenue authority has been set in a targeted national budget of Tk5.5 trillion for the fiscal year 2020-21.

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 Tk31.81 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 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 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 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 8 percent growth in the first nine months of this current fiscal year. The tax authority collected Tk2.23 trillion in 2018-19 fiscal year.