Revenue collection shortfall anticipated

It is hardly surprising that a premier think tank in the country has once again calculated that the government in all probability will miss its tax collection target. The analysis is based on the performance of the preceding three years where the National Board of Revenue (NBR) failed to reach revenue targets, and there are valid reasons for the shortfall. This year's revenue collection has been set at 35 per cent above the revised target and stands at Tk203,150 crore for FYI 2016-17.

What is perplexing is how such an ambitious target has been set in the first place. More so, since NBR collected 90 percent of the target in 2014-2015, and there are many factors that can hinder tax collection. When we take into account the fact that this year's budget is considered by some as very ambitious and that a number of incentives such as lower corporate income tax, reduction in custom and supplementary duties and the fixation of 0.6 percent tax at source for apparel (as opposed to the proposed 1 percent) – will all eat away at revenue collection, we are apprehensive that the target will not be met.

Perhaps the upcoming flat rate VAT at 15 percent on more than 1,900 tax-exempted products that will come under the law is expected to greatly help with revenue generation. However, without urgent reforms that allow tax payers to file returns and pay taxes online seamlessly, and expanding the tax base, it may be immensely difficult to meet the revenue target. These are the areas that require urgent government intervention. Otherwise, we may once again witness a revision of the budget half way through implementation.