Income tax collection faces setback in H1

Income tax collection faced a substantial shortfall against the target set for the first half (H1) of the current fiscal year (FY), 2015-16, largely due to sluggish economic growth and bleak investment scenario.
Income Tax Wing of the National Board of Revenue (NBR) faced an aggregate shortfall amounting to Tk 44.39 billion against its target set for July-December period.
In the period, NBR collected Tk 205.83 billion income tax against its target for Tk 250.22 billion.
Income tax collection, however, posted a 9.95 per cent growth in the first half of the current FY over that of the corresponding period of the last fiscal.
Sluggish trend of development activities, poor scenario of private sector investment and ambitious collection target are cited, by the taxmen, as the main reasons behind the shortfall in tax revenue collection.
A significant portion of income tax comes from Advance Income Tax (AIT) at import stage.
According to the Bangladesh Bank (BB) data, overall import decreased in terms of value in July-November period due to falling trend of commodity prices in the global market.
The actual import in terms of settlement of letters of credit (LCs) grew by 2.48 per cent during July-November period of FY 16 against that of the corresponding period.
AIT collection also depends on implementation rate of the Annual Development Programme (ADP).
In July-November period, ADP implementation rate was three per cent lower than that of the corresponding period last year.  
ADP implementation status, including that of self-financed projects, during the first five months of the current FY reached 17 per cent with an overall expenditure of Tk 169.57 billion.
Officials said the government has set around 30 per cent growth target in income tax collection in FY 2015-16. Income tax collection target is the highest among the three wings of NBR.
The government has set Tk 1.76 trillion target for the revenue board in the current FY. Of the target, Income Tax Wing has to mobilize Tk 659.32 billion, followed by Value Added Tax (VAT) Tk 639.02 billion and customs duty Tk 465.36 billion.
The board collected Tk 205.83 billion net income tax until December 15 against Tk 187.21 billion in the corresponding period.
Dr Ahsan H Mansur, executive director of the Policy Research Institute (PRI), said the government is imposing tax on existing taxpayers instead of finding out new potential sources for tax collection.
Tax collection would not increase in proportion to rise in tax rate, rather it would spur tax avoidance, he opined.
Slow revenue growth is also a reflection of general economic situation. Profit growth of banks and telecom sector was not significant for contributing to the revenue growth, Dr Mansur also said.
"Administrative reforms, automation and ensuring tax compliance can raise tax revenue collection," he added.
Talking to the FE, a senior income tax official said the government set the highest target for income tax collection, but its fiscal measures cut tax rates from some key sectors.
Cut in corporate tax rate for banks and financial institutions affected the revenue collection flow, he noted.
"NBR expects a higher growth in tax collection in the second half of the current FY. A big chunk of at source tax and corporate tax will be collected by the year-end with implementation of the government's development work," he concluded.
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