NBR in trouble over IMF terms on revenue collection

At a time when the growth in tax revenue collection slowed down significantly, the conditions of the International Monetary Fund (IMF) are pushing the National Board of Revenue (NBR) towards collecting an additional revenue of Tk 300 billion and reducing the current tax waivers in the forthcoming fiscal.

It has put the revenue authorities in a tight corner and the tax officials are exploring new ways to increase tax collection.

The IMF placed the terms while sanctioning a USD 4.7 billion loan in favour of Bangladesh in late January.

One of the conditions is collection of an additional amount of tax revenue than the regular figure in the next fiscal year. The extra amount should be at least 0.5 per cent of the gross domestic product (GDP). Also, there is a condition to take initiative to rationalize the privilege of tax exemption.

According to the NBR sources, the revenue authorities have to collect an extra revenue of Tk 300 billion in the upcoming fiscal. Hence, the target for revenue collection has been set at Tk 4,300 billion, up by 16 per cent from the current fiscal’s target.

If there is a revenue shortfall of more than Tk 300 billion in the current fiscal, the authorities have to collect 25 per cent more revenue than the current target. It is such a growth that the country has never achieved.

Ahsan H Mansur, executive director of Policy Research Institute (PRI), said, “With the current tax administration, it will be quite impossible to collect Tk 4,300 billion in the next fiscal. It would have been possible had the reforms been initiated three to four years earlier.”

He also noted that the amount of import duty will not rise due to the dollar crisis as well as the reduced import of capital machinery. Hence, it will be tough to increase tax collection from the internal sources.

The policy analyst placed two recommendations to tackle the situation. He said around Tk 100 to 150 billion may come in extra if the tax waivers are reduced rationally. But the problem is that the influentials start lobbying at the higher levels once an initiative is taken to revoke the privilege of tax waiver from a sector. Also, the pressure on revenue collection would subside if the subsidy is reduced.