Govt targets Tk 4.8 trillion tax haul in FY25

The government is likely to set a Tk 4.80-trillion tax-revenue-collection target for the National Board of Revenue in the next fiscal year, according to sources, which will be a 17.07-per-cent increase over the revised target of Tk 4.10 trillion for the current FY.

For the first time, the authorities look to achieve an equal share of income tax and VAT collection in FY25, aligning with the government's long-term vision of increasing the proportion of direct taxes within the overall tax revenue.

In recent years, the government has steadily narrowed the gap between income tax and VAT targets in order to reduce reliance on indirect taxes.

For instance, in the current FY, the VAT wing faces a target Tk 41 billion higher than the income tax wing. This target disparity has narrowed from Tk 148 billion in FY2022-23 and Tk 233.98 billion in FY2021-22.

Looking ahead to FY2024-25, both the income tax and VAT wings will have the task of collecting Tk 1.77 trillion in revenue. The customs wing, meanwhile, will have to chase a target of Tk 1.24 trillion.

National Board of Revenue (NBR) officials anticipate mobilising higher direct taxes through fiscal measures, like increasing taxes on luxury goods and products consumed by the affluent.

These measures may include raising the minimum tax on carbonated beverages and all sugar-based products, such as juices, to 5.0 per cent. Besides, there may be an increase of 5.0 percentage points in the tax rate for high-income earners (annual income exceeding Tk 1.6 million).

Currently, the minimum tax on carbonated beverages stands at 3.0 per cent, while other sugar items see a 0.6 per cent levy.

Dr M Abdur Razzaque, chairman of Research and Policy Integration for Development (RAPID) and director of the Policy Research Institute (PRI) Center for Domestic Revenue Mobilisation, said the authorities have estimated the tax revenue target ambitiously.

He cautioned that the NBR's current automation and enforcement capabilities may not be adequate to achieve such an enormous increase.

He, however, appreciated the NBR's shift towards prioritising direct taxes in the upcoming FY.

A contracting import and fast-depleting foreign exchange reserves would squeeze the import revenue next year, according to Dr Razzaque, while focusing on direct tax collection could help offset this decline.

He, however, was sceptical about achieving such high growth in revenue collection, given the ongoing economic slowdown.

Tax officials admitted a historical pattern of setting targets based on original, often unmet, NBR goals.

This approach, Dr Razzaque argued, creates undue pressure on tax authorities, who may need to achieve over 30 per cent growth in most years to meet these targets.

The business community has also raised concerns that high targets incentivise tax officials to exert undue pressure on honest taxpayers.

For the current FY, the NBR will have to collect Tk 4.10 trillion in tax revenue. Of the target, the VAT wing will have to collect the highest Tk 1.51 trillion, followed by Tk 1.47 trillion by the income tax wing and Tk 1.10 trillion by customs.

In the first three quarters up to March, the revenue board collected Tk 2.59 trillion -- 63.36 per cent of the revised target. To meet the full-year target, the NBR needs to collect Tk 1.50 trillion in the remaining April-June quarter.

This translates to an average monthly collection of Tk 500 billion in April, May and June.

The revenue board currently faces a shortfall of Tk 219.30 billion against the revised target for the first three quarters.

Tax officials said a big chunk of revenue is collected usually in the last month of June due to government project implementation and intensified collection efforts.

Economists predict a shortfall of Tk 300 billion against the revised target for the current FY. This amount is roughly equivalent to the NBR's average monthly tax collection.

NBR data said the revenue collection is lagging behind its revised target by 36.63 per cent in 3Qs.

Last year, the NBR's tax collection target was Tk 3.70 trillion. Average tax revenue collection growth was 10.64 per cent in 3Q. Revenue collection growth was 8.30 per cent in the same period last year.

Only in the month of March, 2024, the NBR collected Tk 332.79 billion taxes with 13 per cent growth against the corresponding period last year.

Tax collection lagged behind its target around Tk 33.68 billion in the month of March only.

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