The Centre for Policy Dialogue (CPD) predicts a Tk 1.0-trillion revenue collection shortfall this fiscal considering the impact of COVID-19 on the economy.
It also apprehends adverse implications for revenue mobilisation during the remainder of fiscal year (FY) 2019-2020 and beyond.
The CPD believes revenue loss and increased public expenditure for a virus package would trigger fiscal deficit to 5.5 per cent or above of GDP this fiscal.
In a budget proposal for FY 2020-21, it made a charter of recommendations on fiscal and administrative reforms in the upcoming financial plan.
The leading local private economic think tank submitted the proposal to the National Board of Revenue (NBR) recently.
It said tax revenue constitutes 91.5 per cent of this shortfall and the remainder originates from non-tax revenue.
The government does some unforeseen expenditure on medical equipment, a stimulus package for enterprises and direct income support for low-income groups in the informal sector and vulnerable groups, it added.
"Higher demand for cash incentives in the wake of COVID-19 may put an additional fiscal pressure," the CPS cited.
It suggested that the NBR devise a mechanism for tax payments by instalment by both individual and corporate taxpayers up to March 2021.
The agency also recommended raising the tax-free ceiling for individual taxpayers by Tk 0.1 million and offering tax benefit to the agro-based sector.
As the economy is already facing stress on different fronts, the novel coronavirus (COVID-19) has turned a disquieting situation.
Collection from customs duty, value-added tax (VAT) and supplementary duty at the import stage would thus be affected due to a downturn in trade, particularly that of import payments.
"Shutdown of enterprises, job losses and income reduction will lead to lower income tax collection. The private and multinational companies suffering revenue losses will likely to pay lower corporate tax."
The CPD suggested the NBR set collection target in a prudent manner as an overambitious target may lead to weak macroeconomic management like the previous years.
"The NBR should design its proposals for tax measures considering both the mitigation urgency and the subsequent economic recovery in view of the ongoing Coronavirus pandemic," it added.
The centre also suggested the NBR revisit its current fiscal incentives to this effect with a view to reprioritising and restructuring.
"This year, it will be difficult for the NBR to raise tax rates or expand tax net to include new sectors," it observed.
"The primary focus should be on monitoring and enforcement mechanisms to effectively curb tax evasion and illicit financial flows."
The CPD, however, suggested that the ongoing reform programmes, including implementation of the new VAT law and automation be continued.
Due to disruption to major supply chain, it suggested offering comprehensive fiscal, monetary and sectoral measures along with the existing ones.
For farmers and producers in the agro-based supply chains, the CPD proposed fiscal policy support like VAT waiver at the domestic stage from March to June 2020.
It also suggested deferred payment of quarterly advance income taxes till June 2020 and payment of corporate taxes for FY '20 by instalments until March 2021.
For loss-making companies during FY '20, the NBR may allow 'carry back losses' against taxable profits for two previous years-FY '18 and FY '19.
The CPD proposed low-interest credit facility before the next planting time for farmers of perishable items like chilli, cauliflower, leafy vegetables and tomato.
Small businesses, particularly those enterprises that are dependent on sales during the festival of 'Pahela Baishakh' in April 2020 will be hardest hit, it said.
It proposed raising the tax exempted yearly turnover limit for SMEs from Tk 5.0 million to Tk 10 million for FY '20 and FY '21.
The stimulus package should be broad-based to cover those exporting below 80 per cent of their production like textiles, accessories, processed/frozen food, footwear, pharmaceuticals, plastic and ceramic, it observed.
The NBR should consider support measures like increased depreciation of assets for companies for FY '20 and FY '21, and special reduced VAT rate for domestic purchase of goods and services for six months.
It may consider relief from penalties and interest for tax-related payments till December 2020, deferred payment of quarterly advance income taxes till June 2020 and relief of VAT during the period of January-June 2020 for travel and tourism sectors.
"Consider a reduced rate of corporate taxes against earnings during the fourth quarter (March-June 2020) of FY '20 and first quarter (July-September 2020) of FY '21 for pharmaceutical companies, hospitals, clinics, and other health facilities."
The government may consider introduction of tax credits for amounts paid by businesses to sanitize work premises for FY2020, the CPD added.
It proposed to incentivise doctors, nurses and other support staff members working in hospitals with corona patients and related matters.
"Hospitals, clinics, diagnostics and laboratories involved in corona-related treatment and research should get a waiver as regards advance income taxes for the period of March 2020 to June 2020."
Grants or donations in cash for prevention, diagnosis, control, attention and treatment of COVID-19 in favour of authorised public and private hospitals and clinics should not be considered taxable for FY '20, it said.
To ensure food security of low-income groups during this surreal time, the CPD sought reductions in import-related tariffs on essentials like onion, lentils, garlic, ginger and soya bean.
It said the existing black money whitening facility through voluntary disclosure of undisclosed income encourages tax evaders only.
This provision should go from the next fiscal. Even it has failed to register any notable response.
"To tackle the problem of black money, a Benami Property Bill may be introduced as was suggested earlier by the CPD," the think tank concluded.