Revenue receipts tick up but fall short of target

The revenue collection growth rose slightly in the July-November period of the current financial year on the back of higher income and value-added taxes, provisional figures from the National Board of Revenue (NBR) showed.

In the first five months of 2023-24, the tax collector received Tk 132,334 crore, posting a growth of 14.26 percent year-on-year. It grew 12.68 percent as of October.

The receipts, however, were 11.06 percent shy of the Tk 148,794 crore target set for the NBR for the five-month period.

Customs collections slowed slightly to 8.84 percent to Tk 41,439 crore. This was lower than the 12.68 percent growth seen in July-November of 2022-23.

This might be a reflection of the decelerating international trade of Bangladesh, stemming from the persistently higher US dollar rate that has made imports costlier, a fall in exports, and the slowdown in economic activities at home amid economic and political uncertainty.

For instance, as a result of the consistent pressure of external payments, the local currency has lost its value by about 28 percent since January last year when foreign exchange reserves started to decline at a faster rate.

Imports declined 20.54 percent year-on-year in July-October and 10.42 percent alone in October, according to the central bank. Although exports rose 1.30 percent in July-November, it fell 6.05 percent in November.

VAT collected from the domestic sector stood at Tk 51,510 crore, an increase of 16.50 percent from the identical period last year. The pace was also higher than in July-November of FY23 when it stood at 16.26 percent.

Personal and corporate income taxes and travel taxes generated Tk 39,384 crore for the NBR, up 17.45 percent from a year earlier. The growth was 10.25 percent in July-November of FY23.

The government has set a Tk 430,000 crore collection target for the NBR for FY24, which ends in June. Receipts averaged 12.12 percent in the past five years.

The overall collections in July-November might give some relief to the government as it has stepped up efforts to raise more taxes to broaden its capacity to spend amid a tight fiscal situation.

It will have to accelerate the tax receipts to meet the conditions set with the $4.7 billion loan programme of the International Monetary Fund (IMF).

For example, the government will have to increase collections by 20.41 percent to Tk 394,530 crore in June. Receipts stood at Tk 327,650 crore at the end of FY23 against the IMF target of Tk 345,630 crore.

The NBR failed to hit the collection target for the 11th straight year in FY23.

Zahid Hussain, a former lead economist of the World Bank's Dhaka office, said considering the overall economic situation, the collection is not that bad. "It could have been worse."

He said raising revenue collection in line with the IMF target will be challenging since most of the taxes would have to be collected by the NBR.

He attributed the currency depreciation and higher inflation to the spike in the income tax and VAT collections.

Recently, the government told the IMF that it was beefing up efforts to strengthen the tax administration.

It has taken steps to increase taxpayer registration by making it mandatory to present proof of tax return submission to receive 38 government services, which has helped increase the number of registered taxpayers by 10 lakh in FY23.

The government plans to reach one crore registered taxpayers by 2026.

Besides, the NBR installed 9,572 electronic fiscal devices (EFDs) as of July. In FY24, it expects to install another 10,000 EFDs and another 300,000 EFDs over the next five years.

The government said it has adopted measures that are expected to yield revenue gains of 0.5 percent of GDP in FY24.

Towfiqul Islam Khan, a senior research fellow of the Centre for Policy Dialogue, said: "Without a big push, we will not be able to reach the revenue generation target. If we can't accelerate the pace, the IMF programme will be threatened as well."

He urged the NBR to raise its efficiency to raise more taxes.