Budget implementation crucially depends on successful revenue collection

Dr. S M Jahangir Alam :

The National Board of Revenue (NBR) is under multifaceted pressure. NBR is in trouble with the collection of duties and taxes. On the one hand, the conditions of the International Monetary Fund (IMF) – the tax collection should be increased by 10.5 percent of the GDP in the current financial year.

On the other hand, there is a fear of slowdown in business due to political instability, conflicts. It may reduce revenue collection as in the past.

According to NBR sources, in the first three months of the current financial year (July-September), there has been a shortfall of Tk 8,208 crore in revenue collection.

During this period, the total revenue was 76 thousand 738 crores, although the collection target was 84 thousand 947 crore taka. NBR has been lagging behind in the collection of duties and taxes since the beginning of the financial year.

In the current financial year, the target of tax collection of 4 lakh 30 thousand crore rupees has been fixed for NBR. NBR officials feel that the pace of tax collection will pick up towards the end of the year.

Imports, VAT and income tax-none of these three sectors have met their collection targets in the last three months. The biggest deficit was in the income tax sector.

A country’s revenue is an important source of budget expenditure. If the revenue flow is smooth and the concerned departments are free from corruption, it becomes easier for the government to carry out its expenditure.

The government needs to have a guaranteed source of income to finance important projects, to keep vital sectors like education, health and defense functioning.

The National Board of Revenue (NBR) has set a target of Tk 3 lakh 70 thousand crore revenue collection in the just ended 2022-23 financial year.

Although during this time the organization has collected a little more than 3 lakh 31 thousand 502 crores.

According to that, in the last financial year, the company’s revenue collection is about Tk 38 thousand 498 crore less than the target.

NBR derives its revenue mainly from three sectors – Customs, Value Added Tax (VAT) and Income Tax and Travel Tax. In the last financial year, the biggest shortfall in revenue collection of the organization was in the customs sector. Next in deficit were VAT and Income Tax and Travel respectively.

Due to the dollar crisis, the import of goods and opening of LCs were strictly imposed in the last financial year.

This is believed to have played a major role in the decline in revenue collection in the customs sector. According to NBR data, the shortfall in revenue collection from the sector is 16.46 percent of the revised target.

In the last financial year, NBR had set a target of collecting 111 thousand crore rupees as duty at import and export level, although the income of the organization is 92 thousand 732 crores. Compared to the target, the revenue collection deficit in the sector is Tk 18 thousand 268 crore.

Businessmen are also blaming import and LC opening as the reason for the decrease in revenue collection.

There is not much possibility of increasing revenue from the customs sector soon. According to the data of Bangladesh Bank, in the 11 months from July to May of 2022-23 fiscal year, the loan amount was 6 thousand 996 million 50 million dollars, which was 8 thousand 916 million 23 million dollars in the same period of 2021-22 fiscal year.

Accordingly, in the first 11 months of the last financial year, the rate of loan opening in the country has decreased by more than 14 percent compared to the same period of the previous financial year.

In the VAT sector, NBR’s revenue collection target in the last financial year was Tk 1 lakh 36 thousand 900 crore. Against this, 1 lakh 25 thousand 423 crore taka has been collected.

At this time, the revenue collection from the sector is 8.38 percent less than the target.

However, compared to the fiscal year 2021-22, NBR’s revenue from the VAT sector has increased by Tk 17,000 crore. Accordingly, the growth rate of the VAT sector in the last fiscal year was 15.68 percent.

At the end of the financial year 2022-23, the revenue deficit of NBR through income tax and travel stood at more than 8 thousand 753 crore rupees.

The target of revenue collection in this sector was 1 lakh 22 thousand 100 crores. The income was 1 lakh 13 thousand 346 crore taka.

In today’s world efficient public finance system is essential for running the economy of any country. The overall socio-economic development and stability as well as economic welfare of a country depend on the government financial system of that country.

Until the latter part of the 19th century, government revenue and expenditure, as well as government finance, did not play a significant role.

The government that earns less by spending is better. The less the government intervenes in the economy, the better. But now this concept is different.

Now it can be said that the government that has more income and expenditure is the government that is development friendly. So most countries in the world currently run deficit budgets and the government spends much more than the income.

In this case, the government spends a lot on education, health, communication and infrastructure development to improve the quality of life of the people of the country. Development in these sectors is almost impossible without government spending.

The economy of Bangladesh is growing rapidly since the nineties. But the tax-GDP ratio is not increasing, which is also a matter of concern.

The government has to rely on domestic and foreign loans to implement the budget due to the lack of consistency of revenue collection with the economy.

Bangladesh will officially join the ranks of developing countries in 2026, aiming to become a high-income country by 2041.

But this cannot be achieved by keeping the tax-GDP ratio. In this case, it is necessary to formulate an action plan or action plan to increase revenue collection. In order to increase the revenue base, necessary reforms should be brought in it.

There is no alternative to administrative reforms to increase revenue, speed up tax collection, establish revenue offices in all districts and upazilas and conduct tax surveys.

Although the country’s economic activities, trade and commerce etc. have increased, there has been no reform in the revenue administration after 2011.

Although the proposal for increasing the number of manpower and office, as well as administrative reform was made a few years ago, this proposal has not yet been sent from the Internal Resources Department for the government’s approval.

As a result the desired reforms are being delayed, which is not desirable. Big budget implementation will be difficult if revenue collection is not increased.

The slowdown in the global economy and the ongoing political uncertainty in the country are indicative of the difficult situation. In this situation, it is expected that the relevant departments of the government including NBR will take effective steps to smooth the revenue flow.

The writer is Bir Muktijoddha, Former Tax Commissioner and Director, Bangladesh Satellite Co. Ltd.