July-August revenue falls by Tk 54.56b

Trading was apparently closed in the country during the student-people movement in July and August, the first two months of the ongoing 2024-25 fiscal (FY25); there were public holidays and a curfew was also in place, hampering overall tax and duty collection.

Revenue collection by the National Board of Revenue (NBR) fell by Tk 54.56 billion year-on-year in July-August of the current fiscal while the deficit on the collection target was over Tk 150 billion.

The visiting delegation of the International Monetary Fund (IMF) also expressed dissatisfaction over the downtrend in revenue collection during a meeting with the NRB officials in Dhaka on 26 September.

At the meeting, NBR officials requested the IMF to reduce the tax-duty collection target for the current fiscal because of the persisting political uncertainty and economic activities.

Former chairman of NBR Muhammad Abdul Mazid told Prothom Alo that revenue collection usually remains low at the beginning of the fiscal, but this time, the situation was different. Student-people movement and political instability marred the situation in the country in July-August. Neither any office nor the court and businesses could open. As a result, revenue collection growth was not as expected, he added.

He, however, thinks it is possible to recoup the losses in the coming months because tax officials can work without fear under the interim government, as well as there will be no lobby from influential quarters.

According to the NBR, revenue collection decreased by Tk 54.56 billion to 421.06 billion in July-August of the current fiscal from Tk 475.62 billion in July-August of the 2023-24 fiscal.

Overall revenue collection also fell by Tk 150 billion from a target of Tk 571.75 billion in July-August of this fiscal because of student-people movement, curfew, government holidays and uncertainty over business.

The NBR set a target of Tk 4.80 trillion in revenue collection for the 2024-25 fiscal. Officials think tax collection will rise at the end of the fiscal year.

Recently, NBR chairman Abdur Rahman Khan told the tax and customs officials at an event that this time revenue collection target will not drop.

According to NBR sources, none of the three sectors – import, VAT (value added tax) and income tax - reached the target in July-August with the income tax sector seeing the highest deficit of Tk 7.41 billion during this period.

Revenue collection from income tax was at Tk 115.93 billion against a target of Tk 186.35 billion in July-August. The import sector saw a deficit of Tk 29.05 billion as Tk 144.85 billion was collected against a target of Tk 173.90 billion while the deficit was Tk 51.22 billion for the VAT sector as Tk 160.28 billion was collected against a target of Tk 211.51 billion.

Bangladesh sought loans from the IMF in July 2022 to maintain a balance in the financial sector of the country and the lending agency approved USD 4.7 billion after six months on 30 January 2023.

The fund will be released in seven instalments by 2026 with Dhaka already receiving three trenches of the loan.

IMF loans came with a set of instructions and the revenue sector also falls under their conditions. The two major conditions are: the collection of additional revenue equal to 1.5 per cent of GDP and withdrawal of all tax rebates by 2027.

As per the IMF instructions, a strategy must be formulated by December to increase revenue collection.

Bangladesh must take major reform initiatives to receive the fourth tranche of IMF loans as the review of fund disbursement is underway.

Initiatives must be taken to release the list of the bad assets in state-owned banks, formulate plans to monitor the banking sector, fix interest rate structure and reduce the financial risks of state-owned institutions.

* This report appeared in the print and online editions of Prothom Alo and has been rewritten in English by Hasanul Banna