An 'ambitious' revenue target set for the next budget prompts the government to estimate 36 per cent of the domestic revenues to be realized from direct taxes, hugely banking on import duties.
For the upcoming financial year (FY) 2023-24, the Ministry of Finance (MoF) has set Tk 4.30 trillion as revenue-collection target for the National Board of Revenue (NBR).
Of the target, Tk 1.54 trillion is set to be collected by the direct-tax wing while Tk 1.16 trillion by the customs wing of the revenue board.
However, the highest is earmarked to be mobilized by the value-added tax (VAT) wing, amounting to Tk 1.59 trillion.
Target for income tax has been set at Tk 1.22 trillion while it is Tk 1.36 trillion for VAT and import taxes Tk 1.11 trillion in FY 23.
The government is set to propose in parliament a Tk 7.64 trillion worth of national budget for the upcoming fiscal on June 01.
Officials say the tax-revenue target has been set "ambitiously, as usual, like in previous years despite having limited scope to achieve it".
A senior NBR official says the board may not offer any gross exemption to any sector as it needs to mobilize domestic revenue to meet the target advised by the International Monetary Fund (IMF).
The IMF has recommended for the NBR to increase the country's tax-GDP ratio by 0.5 each percentage point in FY 23 and FY 24 and 0.7 percentage point by FY 25.
Projections by two leading think-tanks signal high revenue shortfalls in the current fiscal. The Centre for Policy Dialogue (CPD) and PRI earlier estimated that the NBR might face a shortfall against tax-revenue collection worth Tk 750 billion and Tk 546 billion respectively in the current fiscal year.
According to data available with Finance Division under the MoF, the government's tax-revenue collection was Tk 2.87 trillion in the last FY against its target for Tk 3.30 trillion. In the current FY, the NBR will have to collect Tk 3.70 trillion in tax revenue until June 30, 2023.
With the projected shortfalls in CPD and PRI calculations, the NBR will have to achieve over 32-percent growth in tax-revenue collection in the upcoming fiscal year to reach the Tk 4.30-trillion target.
Domestic tax-revenue collection had faced a shortfall worth Tk 375.33 billion until April against its target.
In the July-April period, the NBR achieved 5.90-percent growth over the corresponding period last year, according to provisional NBR data.
Revenue-collection growth was 12 per cent on average during the last five years.
The NBR collected Tk 2.47 trillion in tax revenue in July-April period against its target for Tk 2.84 trillion.
The board will have to collect Tk 1.22 trillion in revenue in May and June, Tk 613.03 billion per month, to achieve the target Tk 3.70 trillion set for this year.
Dr Ahsan H Mansur, Executive Director of the Policy Research Institute (PRI), predicts "it's not possible to achieve the ambitious growth" in tax-revenue collection since no reforms have been carried out for a long time.
"The government should set a realistic tax-revenue-collection target on the basis of actual tax-revenue collection. Fixing target setting growth on budget to budget should be avoided," he suggests.
During the last 12 years, the NBR had achieved tax-revenue-collection target once only, he said.
"Efficiencies of tax administration have also deteriorated over time. Tax-GDP ratio is declining while revenue-collection growth has also witnessed a sluggish trend," he adds.
According to the PRI's Study Center for Domestic Resource Mobilisation, tax-GDP ratio declined to 7.4 per cent in FY 2023 from 7.9 per cent last year.
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