The National Board of Revenue (NBR) is now on a tight spot as the Finance Ministry has set a big tax collection target to meet additional demands from ministries for a faster Covid recovery. On the other hand, businesses demand tax cut and economists call for no fresh burden on people at this pandemic time. Experts say the revenue authorities will have to look for ways to keep income tax and value added tax (VAT) down to give businesses a breather as in other countries around the globe.
A report published in a national daily on Friday said that the NBR, which has already fallen short of its revenue collection target in the first eight months of the current fiscal year, has been left with tough choices. Actually, when the NBR was given a target of Tk 3.30 lakh crore revenue generation, its chairman informed the Finance Ministry in a letter in March last year that the target was not achievable.
As reported, ministry officials think revenue collection in the current fiscal might be around Tk 95,000 crore less than the target. An official of the Finance Division who was involved in preparing the budget said that according to their estimates, Tk 2.50 lakh crore might be collected combining tax and non-tax revenue. Although economic activities have resumed and production and marketing activities of various sectors have reached pre-pandemic levels overcoming pandemic shocks, imports and exports have not yet returned to normal.
Meanwhile, business associations are recommending to the NBR a further reduction in tax and VAT collection target. The apparel sector, the largest foreign exchange earner, wants a cut in tax at source from 0.50 per cent to 0.25 per cent. The sector has requested the NBR to continue the existing corporate tax at 12 per cent and green factory tax at 10 per cent for the next five years. Similarly, the Dhaka Chamber of Commerce and Industry has proposed a reduction of the VAT rate from 15 per cent to 7 per cent and increase of the turnover tax limit from Tk 80 lakh to Tk 1.20 crore.
We believe that businesses pressing for tax, VAT and duty cuts are for survival and merit a sympathetic consideration. If the businesses operate, revenue collection will automatically increase. Tax cut to domestic industries for another year considering the pandemic would be a wise decision.
