Meeting the revenue gap in current fiscal
Tuesday, 3 March 2009
THE revenue collection of the government during the first half of the current fiscal has, according to a report published in this paper the other day, fallen short of its target by 17.86 per cent. This falling revenue collection trend has led to a stepped-up drive by the National Board of Revenue (NBR) to reduce the shortfall for fulfilling the target during the remaining months of fiscal 2008-09. The government's total tax revenue earning target during fiscal 2008-09 period is Tk 545 billion, whereas by July-December of 2008, the collection was only Taka 223.82 billion, though the amount should have been Taka 272.50 billion during this period to match the target for the entire fiscal.
Failure to meet target for tax revenue income of the government means it will be hard pressed to foot the bill of its budgetary expenses. And in that case the government will be forced to borrow more from banks or other sources to meet its expenses for development work as well as for its own expenditures under the revenue head of the budget. Looking at the provisional statistics, there is now every reason for making utmost efforts to prevent any slippage in tax revenue earnings in the second half of the current fiscal.
Under the circumstances, the new government in office is faced with the challenge of meeting revenue target of the current fiscal within the remaining months of fiscal 2008-09. Understandably, a number of factors have contributed to the decline in the revenue collection of the government during the first half of the ongoing fiscal. The first one, as everyone is aware of, is the ongoing financial meltdown in the developed world. This phenomenon has left a serious impact on the income from the customs, value added tax (VAT) at the import stage and also supplementary duties on related import goods. The worldwide slump in business has affected the country's business activities. As a result, the personal incomes of the people whether in business or in job are also likely to have been negatively impacted. To overcome the situation, the finance minister has advised the NBR to enhance its drive to meet the revenue earning target for the current fiscal. Accordingly, the NBR has decided to concentrate its drive in three areas of revenue collection-the customs duties, the Value Added Tax (VAT) and income tax.
The slump in global business and low prices of imported goods leading to the lower earnings from customs duties and other related taxes at the stage of imports constitute a trend that the government has little power to reverse. But at the same time, it is also true that the government is not always hundred per cent successful in fulfilling its revenue earning target when business is normal or even booming. So, in such a particular case, the fall in revenue earning target does not maintain a one-to-one correspondence between the condition of business and the people's level of income. In fact, it is the general apathy of the public towards paying taxes that lies behind this lack of correspondence.
The government, the NBR in particular will have to focus on this fault-line of the tax regime. True, people in general are yet to develop the habit of paying taxes. That needs a change in their outlook. At the same time, the existing procedure of tax collection and the formalities involved do also come in the way of spontaneous response of the public in fulfilling the government's revenue earning drives. However, transforming public perception involves a long-drawn process. For now, to succeed in bridging the gap between tax revenue target and its present status, the NBR personnel will have to intensify their drive in the areas of VAT and income tax collection. For increasing revenue from customs and related taxes, the government will have to further facilitate import of goods in the productive sectors of the economy. Simultaneously, side by side with expanding the tax net, the NBR people will also have to look into loopholes and any other inconsistencies in tax regime that do not encourage voluntary compliance on the part of both actual and potential tax payers.
Failure to meet target for tax revenue income of the government means it will be hard pressed to foot the bill of its budgetary expenses. And in that case the government will be forced to borrow more from banks or other sources to meet its expenses for development work as well as for its own expenditures under the revenue head of the budget. Looking at the provisional statistics, there is now every reason for making utmost efforts to prevent any slippage in tax revenue earnings in the second half of the current fiscal.
Under the circumstances, the new government in office is faced with the challenge of meeting revenue target of the current fiscal within the remaining months of fiscal 2008-09. Understandably, a number of factors have contributed to the decline in the revenue collection of the government during the first half of the ongoing fiscal. The first one, as everyone is aware of, is the ongoing financial meltdown in the developed world. This phenomenon has left a serious impact on the income from the customs, value added tax (VAT) at the import stage and also supplementary duties on related import goods. The worldwide slump in business has affected the country's business activities. As a result, the personal incomes of the people whether in business or in job are also likely to have been negatively impacted. To overcome the situation, the finance minister has advised the NBR to enhance its drive to meet the revenue earning target for the current fiscal. Accordingly, the NBR has decided to concentrate its drive in three areas of revenue collection-the customs duties, the Value Added Tax (VAT) and income tax.
The slump in global business and low prices of imported goods leading to the lower earnings from customs duties and other related taxes at the stage of imports constitute a trend that the government has little power to reverse. But at the same time, it is also true that the government is not always hundred per cent successful in fulfilling its revenue earning target when business is normal or even booming. So, in such a particular case, the fall in revenue earning target does not maintain a one-to-one correspondence between the condition of business and the people's level of income. In fact, it is the general apathy of the public towards paying taxes that lies behind this lack of correspondence.
The government, the NBR in particular will have to focus on this fault-line of the tax regime. True, people in general are yet to develop the habit of paying taxes. That needs a change in their outlook. At the same time, the existing procedure of tax collection and the formalities involved do also come in the way of spontaneous response of the public in fulfilling the government's revenue earning drives. However, transforming public perception involves a long-drawn process. For now, to succeed in bridging the gap between tax revenue target and its present status, the NBR personnel will have to intensify their drive in the areas of VAT and income tax collection. For increasing revenue from customs and related taxes, the government will have to further facilitate import of goods in the productive sectors of the economy. Simultaneously, side by side with expanding the tax net, the NBR people will also have to look into loopholes and any other inconsistencies in tax regime that do not encourage voluntary compliance on the part of both actual and potential tax payers.