Experts suggest creating new tax sources following suspension of VAT law

Analysts have suggested alternative sources that may help the government meet the revenue target in national budget for FY2018.

The parliament passed the Tk 4.26 trillion budget for fiscal 2017-18, which has a revenue target of Tk 2.88 trillion, on Thursday.

From value-added tax, the government initially aimed to earn more than Tk 910 billion, a fourth of the total target.

The target was based on the government’s previous plan for a 15 percent uniform VAT rate.

Finance Minister AMA Muhith

But Prime Minister Sheikh Hasina reversed the move on Thursday, keeping the existing multiple rates of VAT for the next two fiscal years.

The government brought down its target for Tk 727 billion in VAT to Tk 686 billion in the current fiscal year ending Jun 30.

The move has triggered the question on how the latest target will be achieved with the existing rates.

“The target is far from achievable,” said former finance adviser to caretaker government AB Mirza Azizul Islam.

“Even if all institutions are registered for VAT a deficit of Tk 100 billion will be there,” he said calling on the government to revise the budget and make it compact.

Former Bangladesh Bank governor Mohammed Farashuddin emphasised creating new sources of tax.

AB Mirza Azizul Islam

Mohammed Farashuddin

The National Board of Revenue or NBR set a target of earning Tk 1.85 trillion in the outgoing fiscal year. It earned Tk 1.43 trillion until April which is higher than the amount recorded in April 2016.

“It is our failure that we could not make people understand the VAT law,” said Farashuddin.

Khondoker Golam Moazzem

The estimated receipts from VAT for the new year are 33 percent higher than last fiscal year; it is not easily attainable, said Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue, a research organisation.

The deficit may rise if revenues are not earned at the same pace, he said.

There is a deficit of Tk 1.13 trillion in the budget which the government plans to meet by foreign loans of $7 billion, internal bank loans and savings certificates.

Moazzem advised the government to consider bank loans rather than depending too much on savings certificates.

Bangladesh never used more than $3.5 billion foreign funds. “Using $7 billion will be difficult.”