Dr. SM Jahangir Alam :
The debt burden of the government is increasing as compared to revenue collection. More than half of the revenue collected by the National Board of Revenue (NBR), the government has to borrow from domestic and foreign sources.
Development and non-development expenditure of the government is increasing every year. But due to non-collection of sufficient revenue, the government has to borrow to meet the additional expenses.
As a result, the government’s debt ratio is increasing in proportion to revenue collection, and the debt repayment pressure is also increasing. The tax-GDP ratio in the country is still below 10 percent.
The tax-GDP ratio situation has not been good for two decades. However, the tax collection situation has worsened in recent times as compared to the Gross Domestic Product (GDP).
Revenue collection is not increasing at the same pace as the size of GDP is increasing. The countries in the world are lagging behind in terms of tax collection compared to GDP.
Low revenue collection and high borrowing are putting pressure on the budget. Analyzing the data of NBR and the Ministry of Finance, it has been found that in the span of 10 years, the amount of domestic and foreign loans has increased by 9 percentage points in proportion to the revenue collection of NBR. This means, every year the government’s borrowing is only increasing.
The tendency to take loans for three-four years has been seen higher. Bangladesh government borrows more from countries and organizations like World Bank, Asian Development Bank (ADB), Japan, China, Russia, India. Most of the loans are taken to implement various projects under the Annual Development Program (ADP).
And among internal loans, the government mainly borrows more from banks and financial institutions. Apart from this, money is borrowed by selling savings bonds and issuing bonds to meet the increased demand for money.
A look at the revenue collection statistics shows that the NBR has not achieved its target in any of the last 10 years.
The organization could not achieve the revised target in any other year except the financial year 2013-14. In the financial year 2013-14, i.e. 10 years ago, the government took a total of Tk 53,595 crore in loans from domestic and foreign organizations.
The amount of NBR revenue that year was 1,20,819 crore. But to meet the non-development expenditure and fund the development budget, the government had to borrow money beyond the NBR’s income, which was about 44 percent of the NBR’s income. This rate only increased over the next decade.
In the last fiscal year 2022-23, the total net debt of the government from domestic and foreign sources was 1,72,285 crore. In this financial year, the collection of NBR was 3,25,272 crore. That is, compared to the amount of money that NBR was able to collect, the government was forced to borrow 53 percent more money to meet the expenses.
Low revenue collection and high borrowing are putting pressure on the budget. According to a report on debt management by the International Monetary Fund (IMF), the amount of money Bangladesh has to spend on domestic and foreign debt interest payments is equal to 71.8 percent of revenue collection and grants.
In the current financial year, it increased to 101 percent can be promoted. On the other hand, the NBR has collected Tk 76,751,300,000 in the first three months of the current financial year, which is Tk 8,195,630,000 less than the target.
The revenue target for the three months from July to September was 84,946.93 crore taka. The biggest deficit is in income tax, 3,526.85 crore taka. This information is known from NBR sources.
However, the collection of revenue less than the target has happened in the previous years as well. There are no signs of improvement in this regard. This is due to lack of proper planning.
NBR derives 86 percent of the revenue sector of the country. Basically, revenue collection targets are set in three sectors namely income tax, VAT and customs.
According to NBR sources, in the first quarter of this year, there is a deficit in revenue collection in all three sectors of NBR. Out of this, the income tax target was Tk 27,168 crore. The revenue there was only 23,641.15 crore taka. NBR’s claims that due to dollar crunch and control of LCs, there is a growing shortfall in revenue at customs level.
Besides, income tax generally generates more revenue towards the end of the fiscal year. Therefore, even if there is a shortfall at present, the desired target of revenue can be met at the end of the financial year, NBR has expressed optimism.
NBR is exempting tax from many places or reducing tax rate due to shortfall in revenue collection. This issue is being presented. But he is insisting on the stability of NBR in these places to increase the revenue income.
Revenue has an important role in running the country’s economy properly. For this, the target should be determined in the light of specific action. Because setting unachievable targets will not eliminate the shortfall in revenue collection. For this, it is necessary to take the advice of experts related to the sector. We want to see NBR play a dynamic role in revenue collection.
For this, realistic specific targets should be set at the beginning of the financial year. Revenue collection targets are not being achieved due to lack of specific targets. Therefore, before formulating the budget, there is a need for balance between revenue and expenditure.
(Author is Bir Muktijoddha, former Tax Commissioner and Director-Bangladesh Satellite Co. Ltd.)