Boosting NBR's tax collection capability

The revenue authorities as usual failed to reach their tax collection target in the first half of the current fiscal year. According to a report carried in the FE, tax collection during the period since July 2024 till February 16, 2025 declined 1.53 per cent despite extension of the tax return submission deadline thrice and an increase in the number of returns by 150,000 with a growth rate of 4.11 per cent. The overall tax receipt by the revenue board lags behind the target by a big margin. During the said period, the National Board of Revenue (NBR) received Tk 62.44 billion from returns against Tk 63.42 billion in the same period last year, official data showed. The reason behind this poor achievement might be that a section of the well-off taxpayers were on the run for crackdown on corruption and, like in every year, some 60-70 per cent individuals submitted tax returns showing zero income.

Whenever the revenue authorities fail to fulfil tax collection target, the country's economic growth is seriously hampered. The government will have to be dependent more on bank borrowing and loans from foreign sources, the adverse impacts of which are known to all. Massive bank borrowing of the government will exert more pressure on financial institutions that are already in liquidity crisis, which has already hamstrung some of the lenders. Panic withdrawals and investment in government security market have led even to waning of the banks' cash from deposits. Further aggravation of bank's liquidity crisis will reduce or stop flow of loan to private sector entities. To print notes to meet government needs will have severe implication on the inflationary market situation.

The annual budgets in Bangladesh are marked by a wide gap between earning and spending --- revenue earning target is far short of revenue expenditure plan. To make up for this shortfall of funds, every budget sets before itself a huge revenue collection target that has proved to be much beyond the ability of the tax collection authorities. The NBR has never been successful in reaching targets. The performance of the revenue authorities in collecting taxes has not been as pleasant and encouraging as it should be. Its actual revenue collection is usually less than even the revised target, which again is smaller than the original target. Instead of narrowing down the deficit, its failure actually widened the same.

In a resource-constrained country like Bangladesh, revenue collection efforts are crucially important to mobilise domestic funds in order to meet budget expenditure. Successful implementation of the financial programme of a government depends almost absolutely on the volume of the revenue collected. Thus, revenue mobilisation authorities are like the breadwinner of a family; if he/she earns better, family members will have enough food, clothes and a shed over their heads but if his/her earning is not up to the level, they may have to starve. This brings forth the need for enhancing the earning capacity of this breadwinner.

The most effective way of coming out of the tax collection debacle, as stakeholders suggest, is the collection of VAT and all other taxes based on optimum expansion of the tax net much beyond its present limit. Many individuals and companies having taxable income still evade taxes. According to another report of this daily, Finance Adviser Dr Salehuddin Ahmed expressed his concern that at the village or upazila level there are many businesspeople who earn a lot but are reluctant to pay taxes. Doctors and many other professionals often make cash transactions but do not give receipts to the payers. Thus, these transactions remain out of accounts and the purview of tax. He said that there are around 5.0 million industrial units but only 0.5 million of them pay tax. What a colossal failure of the revenue authorities! If these errant industry owners were brought under the tax net, the tax collection target could nearly be fulfilled.

Regarding the urgent need for widening tax net further, the adviser said the NBR may launch special drives in the respective areas while the DCs help in identifying the tax-dodgers in their areas. The government would try to cast the tax net wider but not increasing the rate but keeping it at a tolerable level in the upcoming budget. Such a step would lessen the burden on taxpayers. He added that the government will now consider lowering indirect taxes and try to generate more direct taxes. Even a significant number of TIN holders reportedly evades tax return submission and refrain from paying taxes. They must be made to submit returns and pay tax. Punitive measures should be taken against tax dodgers and those who submit false or misleading statement of their income and business transactions. Strict punishment should be awarded to corrupt tax officials who are allegedly in an unholy alliance with tax evaders. Tax return submission process must also be simplified.

However, beside the above negative growths, the rosy side of the tax collection scenario is that the tax return submission, as mentioned before, grew by a significant margin. The NBR received 3.9 million returns against 3.8 million in the corresponding period last year. Moreover, 35 per cent of individual taxpayers submitted returns online, signifying a progress of the digitisation process and a growing acceptability of the new system. If efficiently utilised, these positive growth trends along with measures like widening of the tax net, skill development of tax officials and opening of tax offices at upazila level will help increase tax collection in the future.

[email protected]