Reforms, capacity-building necessary to fulfil tax collection targets

In April, the growth of tax collection decreased further, posing challenges for the National Board of Revenue (NBR) to reach its goal of raising Tk 370,000 crore in the current fiscal year. Two research agencies have warned that the target is likely to go unmet once again. According to provisional data from the NBR, the revenue administration collected Tk 247,390 crore in the first ten months of the 2022-23 fiscal year, which amounts to 67 per cent of the annual target. This means that tax officials will need to collect Tk 122,600 crore in the remaining two months, ending in June.

Data from the finance ministry shows that if the economist’s projection comes true, this would be the 11th consecutive year that the NBR, responsible for over 85 per cent of the state’s total revenue, fails to meet the government’s tax collection targets. The Centre for Policy Dialogue (CPD) has previously projected that the overall revenue collection shortfall, based on the current revenue mobilisation trend, could be around Tk 75,000 crore. The Policy Research Institute of Bangladesh (PRI) also predicts that the tax authority is likely to fall short of the tax collection target of Tk 345,630 crore set by the International Monetary Fund (IMF) as part of its $4.7 billion loans.

Although the NBR experienced a recovery in tax collection after the reopening of the economy following the lifting of Covid restrictions, the growth in tax collection for the July-April period of FY3 was only 6 per cent, compared to 15 per cent during the same period the previous year. NBR data reveals that tax collection from international trade grew by a mere 1.68 per cent year-on-year to Tk 74,230 crore in July-April, primarily due to declining imports. Income tax receipts saw a 3.15 per cent increase to Tk 78,058 crore. Value-added tax, the largest source of collection, contributed significantly to the overall growth, with indirect tax receipts rising by 12 per cent to Tk 95,100 crore.

In the new fiscal year, the NBR is expected to be assigned the task of collecting Tk 430,000 crore, which is 16 per cent higher than the revenue target of the current fiscal year. Without reforms, capacity-building, and institutional strengthening, it is unlikely that this target can be achieved within a year.