Hefty VAT collection keeps revenue afloat
Officials fear challenges in the coming months amid falling imports, govt's austerity
Collection of value-added tax (VAT) registered a hefty growth of about 15 per cent in the first eight months to February of the current fiscal year (FY) over the same period of last FY, largely contributed by domestic consumption of goods.
The VAT wing of the National Board of Revenue (NBR) mobilised Tk 2.37 billion less from import sources during the July-February period of FY 2022-23 than that of the same period previous FY.
However, its performance was impressive as compared to the other two wings of the NBR, officials said.
The income tax and travel tax collection grew by 6.29 per cent during the period under review while customs revenue rose 4.36 per cent, according to provisional data of the NBR.
The aggregate tax revenue grew by nearly 9.0 per cent in the July-February period over the corresponding period of last FY. In February last, it grew by only 1.71 per cent.
However, the collection fell Tk 229.78 billion short of target which is equivalent to one month's direct tax collection.
The NBR collected Tk 1.96 trillion in taxes in the July-February period against its target of Tk 2.19 trillion.
Last year, the NBR collected tax revenue worth Tk 1.79 trillion in the same period.
In February, the NBR collected Tk 237.27 billion tax revenue against its target of Tk 294.40 billion for the month.
The VAT wing collected Tk 764.01 billion, followed by income tax Tk 604.37 billion and customs wing Tk 591.98 billion.
A senior official at the NBR said that enforcement of the VAT measures geared up in recent time to check evasion and realise due revenue from the businesses.
"The VAT collection witnessed growth mainly due to efforts made by the VAT officials and the revenue generated from the domestic sources," he said.
The revenue collection scenario was different in the same period of last FY, with 17.50 per cent growth achieved by income tax wing, 22.68 per cent by customs wing and 10.69 per cent by VAT wing.
In the current FY, VAT collection surpassed the growth of the two other wings, said the official.
The average tax revenue collection growth was 12.12 per cent in the last five FYs.
However, the three wings of the NBR lagged behind their respective targets in the July-February period of the current FY.
The VAT collection fell short of target by Tk 57.38 billion while income tax by Tk 34.25 billion and customs by Tk 138.14 billion.
The government has set Tk 3.70 trillion tax revenue target for FY 2022-23. The NBR will have to collect around Tk 1.73 trillion in tax revenue during the remaining March-June period to achieve the target.
NBR officials said that achieving the annual target would be a huge challenge due to the decline in imports and the government's austerity measures on different development projects.
A senior VAT official said the large taxpayers' unit has so far kept the revenue collection growth in a positive trajectory. VAT collection from beverages grew by 15 per cent, mobile phone users by 18 per cent and gas consumers by 20 per cent during this period.
"The NBR is trying to realise huge arrears lying with the state-owned Petrobangla," the official said.
On poor growth of direct taxes, Dhaka University Economics Professor Dr M Abu Eusuf, who is also Executive Director of the Research and Policy Integration for Development (RAPID), said there is no visible step by the government to widen the direct tax net to increase the number of taxpayers and boost revenue collection.
The tax offices should be set up in the upazila level to tap the potential taxpayers in the growth centres, he said, adding that the number of taxpayers is still low compared to that of the size of the population in the country.
The NBR collects 60-70 per cent of the direct taxes from import sources as the Advance Income Tax (AIT).
Dr Syed Aminul Karim, former income tax member of NBR, said the recent higher collection from VAT would be reflected by higher collections of income tax in the following year and later years as it is an outcome of higher production or sales of the industries.
"Income tax payments have been affected by the current liquidity crisis while the VAT collection may have witnessed positive outcomes from the recently introduced online collection system," he said.
He also pointed out manpower shortage in the remote growth centres and absence of proper efforts by field-level tax offices as the weaknesses of the revenue collection system.