The country's main revenue-collecting agency, the National Board of Revenue (NBR), is facing a record deficit in the first nine months of the current fiscal year.
The shortfall in customs and tax collections is nearly Tk 1 trillion, the highest on record at any time.
Throughout the last fiscal year, the NBR had a deficit of Tk 926.26 billion, which was a record at the time. It was surpassed within the first nine months of the current fiscal year.
The International Monetary Fund (IMF) has imposed conditions to increase revenue collection. Faced with such demands from the IMF, the NBR encountered this massive shortfall. To achieve targets for the remainder of the fiscal year, the NBR faces pressure to collect an average of about Tk 73 billion in taxes each month.
A new government led by the BNP has taken over after the interim government. One of the biggest challenges for the new government is to increase customs and tax collection. However, the reality is quite different.
The reform initiatives in the revenue sector taken during the interim government have also stalled. The new government did not present the ordinance to dissolve the NBR for passage in the national parliament.
The challenge of massive revenue collection is looming over the new government. The pressure on government spending through the budget is gradually increasing. There is no alternative to increasing the government's income through the NBR. However, business and trade face multiple crises, including the Middle East crisis and rising oil prices.
The IMF has imposed conditions as well. As a condition of the $4.7 billion loan, the agency has stipulated that additional revenue collection should exceed half a per cent of GDP each year. Furthermore, except for development expenses, all other expenses of the government must be met from internal revenue sources.
Former NBR Chairman and head of the revenue sector reform committee formed during the interim government, Mohammad Abdul Mazid, told Prothom Alo that it is difficult to achieve such a large revenue target with the current revenue administration. Therefore, reform in the revenue sector is necessary, which no government has implemented comprehensively so far.
Abdul Mazid added, "Currently, the NBR formulates policies and also collects customs and taxes. Therefore, ensuring their accountability was not possible. There is an opportunity for arbitrariness in the exercise of power by customs and tax officials."
Deficit of Tk 979.9 billion
In the first nine months of the current fiscal year (July-March), the shortfall in customs and tax collection was Tk 979.9 billion. The NBR released an updated picture of revenue collection today, Tuesday.
During the July-March period, the target was not achieved in any of the sectors—import duty, value-added tax (VAT), and income tax.
In the last nine months, the NBR collected a total of Tk 2.87662 trillion.
The target was Tk 3.85852 trillion. However, the growth in customs and tax collection is about 11 per cent.
In the discussed period, the biggest deficit was in the income tax sector. In nine months, the gap was Tk 405 billion. The deficit in the import sector was Tk 229.73 billion. During the past July-March period, the VAT or VAT collection had a deficit of Tk 344 billion.
NBR officials say that due to the slowdown in business and trade, revenue collection has been relatively low. The NBR is working on increasing the tax base, ensuring tax compliance, preventing tax evasion, and recovering evaded revenue.
According to the revised budget, the NBR needs to collect Tk 5.03 trillion in the current fiscal year.
What are the challenges
A major challenge for the new government is to collect a huge amount of customs and taxes in the next three months. Between April and June, Tk 2.15 trillion needs to be collected. If an average of Tk 717.12 billion is not collected each month, the target will not be achieved.
Collecting such a massive amount is not easy. Because in none of the months of the current fiscal year, such revenue has been collected. In January, the NBR collected the highest amount of Tk 373.3 billion. The lowest revenue collection this year was in August, amounting to Tk 272.53 billion.
Another major challenge to achieving revenue collection targets is normalising the pace of business and trade. However, due to the Middle East crisis, rising fuel prices, and other factors, uncertainty prevails in the economy. Business and trade have slowed. Imports have decreased. New investments are not being attracted. For these reasons, revenue collection is not reaching the desired rate.
Achieving such a massive target with the old revenue administration is difficult. Reform is necessary for this—economists and businesspeople have been saying this for a long time. The interim government issued an ordinance reforming the revenue sector, which the BNP government did not present as a bill in the national parliament. As a result, the ordinance became ineffective. Analysts say that through this, the government is backing away from ''non-political'' reforms like in the revenue sector. Even though this reform is crucial for the country's economy.
Additionally, one of the IMF's conditions was reform in the revenue sector. That too has stalled. This makes it challenging to receive loan installments, increasing the uncertainty of government funding from foreign sources.
Furthermore, attention must be paid to solving old problems such as increasing the tax-to-GDP ratio, taking necessary measures to prevent tax evasion, bringing tax-eligible people outside the tax net under the tax umbrella, improving the efficiency of the revenue administration, and taking strict measures against bribery and corruption.