The Financial Express

Tax collection faces headwinds in FY 2019

Shortfall lowest in five years

FE Report | Published: July 05, 2019 09:27:01 | Updated: July 05, 2019 13:23:22

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

Tax collection faced a Tk 600 billion shortfall in the just-concluded fiscal year (FY) against the revised target, lowest in five years.

The National Board of Revenue (NBR) mobilised Tk 2.22 trillion tax revenue in FY 2018-19 against its revised target for Tk 2.80 trillion, according to provisional figure.

The original target of the board was Tk 2.96 trillion for the fiscal year that has just gone by.

In the provisional estimate, the revenue collection growth stood at 7.76 per cent over the corresponding year.

However, officials said that the revenue collection growth could stand at 9.0 per cent after compilation of final figure from the field-level VAT offices.

A senior official of the NBR said the revenue collection figure will increase further by end of this month.

He said VAT offices usually receive revenue after middle of the month from businesses.

In FY 2018-19, the VAT wing collected the highest revenue worth Tk 856 billion, which is 40 per cent of the combined collection.

The income tax wing collected the second-highest amount of Tk 723 billion while the customs wing Tk 644 billion.

In FY 2017-18, the NBR collected Tk 2.06 trillion tax and achieved a 20. 24 per cent growth over the corresponding fiscal.

Revenue collection growth was 11.74 per cent, 13.21 per cent and 12.32 per cent in the FY 2016-17, 2015-16 and 2014-15 FY respectively.

Officials said a large-scale tax exemptions and slower import of revenue generating products are responsible for sluggish growth in revenue collection.

Talking to the FE, Dr Ahsan H Mansur, executive director of the Policy Research Institute (PRI), said import payment dropped to 3.0 per cent last year, which was 25 per cent the year before.

"The lack of reform in the tax administration is mainly responsible for poor revenue collection growth. It may go down further in the current fiscal year unless the government takes proper initiative," he said.

For FY 2019-20, the government set Tk 3.25 trillion target for the NBR. To achieve the target, the NBR will have to achieve 46.39 per cent growth in revenue collection this year.

Dr Mansur cited three reasons for the huge shortfall in revenue collection, including the slowdown in import payment.

"The revenue collection figure illustrates that 8.0 per cent-plus GDP growth estimate of the government is not correct," he said.

He said the efficiency in tax administration is required to increase the internal revenue collection.

About the shortfall, he said the government would have to cut its expenditure plan to avoid increasing the budget deficit beyond 5.0 per cent.

Until FY 18, the country's tax-GDP ratio was 9.28 per cent, which is one of the lowest in the region.

Tax-GDP ratios were 8.75 per cent, 8.88 per cent and 8.95 per cent in FY 17, FY 16 and FY 15 respectively.

Expecting a 13.32 per cent tax-GDP ratio, the authorities had set the tax collection target at Tk 2.96 trillion in the just-concluded financial year.

Officials said the target was too ambitious to achieve as the board expected a 43.50 per cent growth in revenue collection.

Tax collection has averaged 14 per cent in the last five years.



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