The Financial Express

Tax shortfall in Q1: Lower import of 10 major items, exemptions blamed

DOULOT AKTER MALA | Published: November 24, 2019 10:24:25 | Updated: November 26, 2019 11:20:35

Picture used for illustrative purpose only Picture used for illustrative purpose only

Revenue officials have delved into why tax shortfall has hit Tk 149.06 billion during the first quarter of the current fiscal year, missing the target.

In a written paper, both customs and VAT wing explained the reasons for the declining trend and the negative growth of their revenues compared with the same period a year ago.

The downward trend of import of revenue-generating major 10 products, increase in the import of the zero and low-taxed items and a decline in revenue collection from the tobacco sector are among the reasons for the significant falloff.

The two wings have recently submitted the paper to the chairman of the National Board of Revenue (NBR).

In July-September period, revenue collection by both the wings posted a negative growth against the corresponding period of the last year.

Customs wing posted a negative 1.34 per cent growth while the VAT arm 0.86 per cent in the Q1.

In the paper obtained by FE, the customs wing said it received Tk 9.35 billion or 45 per cent less revenue in the July-September period from top 10 revenue providing products.

The wing also said the government has provided different exemptions at the import stage worth 107.51 billion during the period.

The wing received Tk 11.51 billion revenue in the Q 1 against Tk 20.86 billion last year from the imports of cellular mobile phone, CKD (completely knocked down) motor cycle, goods carrier, motor car, diesel oil, lubricating oil, polyethylene, rice, double cabin pick-up, unprocessed aluminum, aluminum ware, etc.

In contrast, imports of products under 0 and 5.0 per cent duty rates shot up by 492 per cent and 4.0 per cent in Q1.

The import of products that belong to higher duty structure -- 10 per cent, 15 per cent and 25 per cent -- dropped by 12 per cent, 8.0 per cent and 11 per cent respectively in that period.

The customs wing has received Tk 5.58 billion lower than expected because of the decline in import of revenue generating products and increasing the import of lower-duty products.

The VAT wing said it received Tk 10 billion lower than expected revenue in Q1 from the cigarette sector alone.

It also received Tk 21 billion less revenue than that of the previous year due to exemptions from gas sector supplementary duty, which was 93 per cent last year.

It also found higher trend in obtaining VAT rebates, reduction of net VAT collection due to the adjustment of 5.0 per cent Advance Tax calculating 33.5 per cent value addition.

The NBR also increased the rate of VAT exemption to 100 per cent from the previous 80 per cent on all utility bills, including gas and power of the export-oriented sectors.

In July-September period, the NBR received a cumulative Tk 473.88 billion in taxes, posting a 2.62 per cent growth. Of the three wings, income tax department recorded a growth of 11.56 per cent.

It collected Tk 159.69 billion tax revenue in July-September period, which was Tk 135.08 billion in the same period last year.

This means all three wings have missed the target, with customs by Tk 61.06 billion, VAT by Tk 64.29 billion and income tax by Tk 23.70 billion.

Officials said if such a trend in the revenue collection continues, there will be a record shortfall this fiscal.

In the first three months, the board collected only 14.55 per cent of its revenue collection target of Tk 3.25 trillion.

An economist said revenue shortfall and lower imports indicate the economy is subdued.

Dr Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh (PRI) said the shortfall in revenue collection and the decline in import of revenue-generating products reflect a depressed economy.

"Overall macro economy is weaker than what is told. If we achieved an 8.0 per cent growth, then why is import negative?" he said.

He questioned why VAT collection posted a negative growth despite the government data showed an 18-19 per cent manufacturing growth.

Weak economic scenario and poor reform activity are the reflection poor customs duty and VAT collection, he added.


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