As tax revenue lags behind the target this year, next year’s optimistic target is unlikely to be reached, an economist says
Published : 24 May 2024, 08:18 AM
In order to hit the tax revenue target for the upcoming budget, the National Board of Revenue will have to dramatically step up its collection from that in the current fiscal year.
The 2024-25 national budget has been planned out with expected tax revenue of Tk 5.5 trillion, according to officials in the finance ministry. The responsibility of collecting the lion’s share of Tk 4.8 trillion will likely fall to the NBR, they said.
If the figure is accurate, the amount is Tk 500 billion more than in the proposed budget for FY 2023-24 and Tk 700 billion more than in the revised budget. Currently, revenue collection lags 8 percent behind the revised target. If the collection does not step up, the government will have to collect Tk 1 trillion more in tax revenue in the coming fiscal year.
The government set a target of Tk 5 trillion in revenue collection in the current fiscal year. This included Tk 4.3 trillion revenue collection by the NBR and Tk 200 billion from other taxes. Revenue from sources other than taxes was fixed at Tk 500 billion.
The government later pushed down the massive revenue target as consumers suffered from eye-watering inflation and austerity policies that slowed the national economy. The revised target for the NBR was reported to be Tk 4.1 trillion.
Accordingly, the NBR has managed to collect a little more than 92 percent of the target revenue in the nine months of the fiscal year, meaning the collection was eight percent lower than the target. However, every fiscal year sees a rise in revenue collection in the last three months.
As of March in the current fiscal year, the government has collected Tk 2.59 trillion, a 15.27 percent jump year-on-year.
Typically, officials keep mum about revenue earning plans before a budget is tabled. But, a higher-up in the finance ministry says the government is proceeding with a Tk 5.4 trillion revenue collection target from local sources. “The figure may vary a little when the national budget is tabled on Jun 6,” they said.
“The target from NBR-monitored taxes is Tk 4.8 trillion, while Tk 150 billion has been targeted from the taxes outside the NBR’s purview. At least Tk 450 billion has been targeted from sources other than taxes,” the official said regarding the major sources of funding for the budget.
If so, the NBR has to increase its tax collection by Tk 700 billion, or 17 percent.
NBR Chairman Abu Hena Md Rahmatul Muneem says that every year the government tries to increase the revenue collection target. “It applies new strategies to achieve that target. We need to wait until the budget is proposed to see the strategy for this year,” he said.
Ahsan H Mansur, executive director of the Policy Research Institute, believes it will be very difficult to hit such a high target if it is proposed.
“Based on reality and experiences, I would say a target of Tk 5.4 trillion will be way too high. Of course, we can’t brush aside the possibility of achieving it if proper policies are applied and necessary measures are taken. But in the past, we have noted that high revenue targets are never achieved.”
The notable economist, a former IMF staff member, doubts whether the revised tax collection target for the current fiscal year will be achieved.
“At the end of the year, [tax revenue] may hit Tk 3.7 trillion. Then how can we plan to increase revenue collection by Tk 1 trillion in a year?”
Based on the current situation and the statistics for the past few years, the NBR will have to surpass all its past achievements if it wants to hit the target set out in the upcoming budget.
Though the board usually collects a higher rate of revenue every year, the growth in this tax collection rate has slowed recently.
The growth in revenue collection was 22 percent in 2020-21, but it dipped to 10 percent in 2022-23.
“Now the revenue growth target is 30 percent. Such high aspirations are never achievable,” said Mansur.