Raising revenue collection by the National Board of Revenue (NBR) has remained in focus for long, with various suggestions coming from different quarters. Beyond the task of achieving a balanced tax-to-GDP ratio, there is a pressing need to elevate revenue generation from its current sluggish state, requiring swift and decisive actions. This issue took the centre stage during a recent meeting titled 'Bangladesh's Domestic Resource Mobilisation: Imperatives and a Roadmap,' hosted by the Policy Research Institute (PRI) in the capital. Speakers delved into the necessity of comprehensive reforms to break free from the country's persistent reliance on debt. The lack of substantial reforms has been identified as a key factor behind poor revenue growth, prompting the identification of lingering issues that, if addressed effectively, could significantly enhance domestic resource mobilisation. Highlighting potential measures for revenue enhancement, the executive director of the PRI underscored that a mere 2.0 percentage point increase in domestic tax revenue could elevate the country's GDP growth by 0.2 percentage points above the current levels. Moreover, he cited the detrimental impact of overreliance on indirect taxation which exacerbates income inequality within the tax structure.
Two of the irritants that continue to deter revenue collection at a higher level, according to the speakers at the event, are tax exemption and subsidy. It was mentioned that phasing out certain tax exemptions could generate an additional Tk 600 billion revenue in next four years. As regards subsidy, it was observed that currently, one-fourth of Bangladesh's tax revenue is spent on subsidy payments. Subsidies in many cases appear questionable in the way they are dished out without proper policies and fiscal logic. Besides the astronomical amounts that have gone to the power sector in meeting the oil import bills from the state coffer is by all means a case of misdirected subsidy. Then again, there is the case of domestic pricing of petroleum products. Despite the unprecedented fall of prices of petroleum products in the international market, the government kept the domestic prices as they were, only to make sure that its state-owned corporation makes profits at the cost of the multiplier impact that oil price fall would have brought to the country had the prices been adjusted.
As a measure of strengthening the NBR in collecting more revenues, the foremost one is its modernisation and automation. Automation has its special appeal to the ordinary citizens, besides the business community. With the government revenue becoming more and more reliant on income tax, the commoners will find an automated tax system very helpful that will not only facilitate online submission of tax returns but also e-payment of taxes with acknowledgement receipts. Widening the tax-net is another key issue that is far from getting due impetus. No doubt, the low Tax-GDP ratio is an indication of the narrow tax net that despite promises for expansion every year in the budget announcement has remained mostly unaddressed.
Time is running out, and unless the authorities do the needful by way of comprehensive reforms, increasing NBR revenue will remain a subject of academic discussion -- as it has been so long.
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