Tax revenues as a percentage of the Gross Domestic Product (GDP) remained low up to May in the country and are set to drop far below the target in the next months.
The country's overall tax-GDP ratio stood at 8.6 per cent up to May last, according to the Finance Division.
The government had a target to raise the level to 9.2 per cent for the entire fiscal year 2013-2014.
The calculation of 9.2 per cent tax-GDP ratio was based on the new base year of GDP measurement.
But, according to the government's earlier estimate, this should have scaled up to 14.1 per cent according to the old baseline of GDP measurement.
However, the Ministry of Finance is now calculating tax-GDP ratio under the new base year of 2005-06.
Economists say the target of 9.2 might not have been achieved in fiscal 2013-14 as the tax authority had cut its target by at least Tk 110 billion for the last fiscal year.
They said the revised target of revenue mobilisation would also not be achieved, thus leading to its poor contribution to the GDP.
Up to May, 2014, total revenue collection for the FY '14 registered 9.7 per cent growth over the corresponding period of the previous fiscal year (FY13), according to the Finance Division.
Dr Zahid Hussain, lead economist at the Dhaka office of the World Bank (WB) said the government has lost sizeable tax incomes from the apparel sector in the last fiscal year as it had reduced tax on them significantly.
The government had slashed by 0.5 percentage point tax at source for readymade garment (RMG) export to make up for their losses incurred during political turmoil, especially during October-December period in 2013.
It is believed that the National Board of Revenue lost at least Tk 20 billion taxes from the apparel sector.
Dr Hussain also said political turmoil had forced many corporate bodies, namely banks, to make low profits leading to shrinking of the earnings in corporate taxes.
Corporate tax and the VAT are assumed to comprise the highest portion of Bangladesh's total tax. Dr Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh (PRI), said the NBR's actual collection of indirect taxes, value-added tax (VAT), also fell in the last fiscal year due to the political crisis.
"Sales of almost all products dropped during political unrest, and it led to poor earnings from the VAT," Dr. Mansur said.
He, who served the IMF and had worked for the NBR, however, said there is need for a massive reform for raising the tax ratio as percentage of the GDP.
He said the government's claim for raising tax as percentage of GDP by 3.0 per cent is applicable for old baseline of GDP measurement.
"It is ironically not true for the new calculation of the GDP," he said.
The new base year of GDP measurement had its widened economic sources, but the tax collection did not grow as per the pace of economic activities.
The government prepared the budget for 2015 fiscal year assuming data of the old base year of GDP measurement as the new baseline data shows many much lower indicators.
However, the 8.6 percentage tax-to-GDP ratio is equivalent to the IMF projection for the last year.
Tax-GDP ratio low up to May, set to drop further
Jasim Uddin Haroon | Published: September 13, 2014 00:00:00 | Updated: November 30, 2026 06:01:00
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