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The collection of government tax revenues continued to grow at below-average rate in the first seven months of the current fiscal year (FY), 2022-23, compared to that of the corresponding period of the last fiscal.
The slow growth is reflected in the government’s belt-tightening measures and erosion of income of both corporate entities and individuals.
The National Board of Revenue’s (NBR) resource mobilisation grew by nearly 10 per cent in July-January period of FY 23, while average tax revenue-collection growth was 12 per cent in the last five years.
Tax revenue-collection growth was 11 per cent until December 2022.
Of the tax-collection wings, income tax registered the lowest 6.49-percent growth, followed by import and export taxes 7.74 per cent, and VAT 15 per cent, according to the NBR’s provisional data.
Tax-revenue collection grew by 18.56 per cent in the same period last year.
The NBR collected Tk 1.72 trillion in tax revenue until January against its target of Tk 1.89 trillion set for the period, lagging behind the target by Tk 172.66 billion.
In the July-January period last year, the NBR achieved 22.23 per cent growth in income tax collection. However, the growth declined to single digit in the same period this FY.
The NBR mobilised Tk 666.02 billion in VAT, Tk 532.61 billion in income tax and travel tax, and Tk 524.45 billion in import and export taxes during the last seven months.
Import and export duty collection fell short of the target by Tk 119.75 billion, the highest among the three wings, followed by income tax Tk 27.58 billion and VAT 25.31 billion.
Income tax collection growth was 7.29 per cent in the July-December period of the current FY.
According to a publication of income tax department, direct tax-GDP ratio in Bangladesh declined by 0.15 percentage points in the last one decade. The country’s direct tax-GDP ratio was 2.72 per cent that slid to 2.57 in FY 2021-22.
Economists said the base of the country’s GDP increased during the last one decade, but tax collection could not follow the pace.
On poor and single-digit growth of direct tax, Dr Ahsan H Mansur, Executive Director of Policy Research Institute (PRI), said corruption and inefficiency are the main reasons for the tax-GDP ratio remaining at an unsatisfactory level.
There is no chance of any change in the situation, unless the government pays attention to reforming the tax department.
Face-to-face meeting and physical visit in the tax department offices have to be stopped. Services should be delivered using numbers, so that taxmen do not know the persons concerned, he added.
The NBR paper said the share of direct tax was below 10 per cent of the total tax revenue collection in FY 1972-73 that increased to above 30 per cent in recent years.
Tax officials said narrow tax-base, wide range of tax exemptions, poor investment in direct taxation, foot-dragging on reform initiatives, and failures to make project outcome sustainable are the other reasons for low-tax GDP ratio.
Direct tax-GDP ratio remained almost between 2.0 per cent to 3.0 per cent in the last one decade, but it reached a peak of 3.22 per cent in FY 2013-14.
However, income tax collection grew by 171 per cent between FY 2012-13 and 2021-22. But tax yield by each taxpayer declined to Tk 0.1 million in FY 2020-21 from Tk 0.2 million in FY 2015-16.
In 2009-10, share of direct tax was 28.09 per cent that increased to 34 per cent in 2021-22.
A senior official said a major task of the NBR would be to narrow down the tax exemptions after conducting intensive analysis on the industries concerned.
The International Monetary Fund (IMF) suggested increasing the country’s tax-GDP ratio by additional 0.5 per cent of the GDP each of FY 24 and FY 25 and 0.7 per cent in FY 26.
The official said the budget for the upcoming FY might have a couple of measures on slashing tax exemption in a bid to raise tax-GDP ratio.
According to the NBR data, some 2.8 million taxpayers of 8.4 million tax identification number (TIN)-holders submitted tax returns in FY 2022-23.
Tax officials expect a quantum leap in the number of direct taxpayers in the current FY due to effective fiscal measures.
A field-level tax official said investment to boost direct tax collection is urgently required to reduce dependency on indirect taxes.
The country is losing a substantial amount of tax revenue due to infrastructure and resource constraints for monitoring income sources, he added.
Currently, the government spends 22 paisa to collect Tk 100 tax revenue, which is the lowest among the South Asian countries.
(FE)
