\\\'Tax buoyancy projected for next FY unattainable\\\'

The setting of record high revenue earning target against the backdrop of existing lower tax mobilisation capacity in all likelihood will affect implementation of the budget for the fiscal year (FY) 2015-16, financial analysts said Saturday.
The analysts said although the government has never been able to cross the 2.0 per cent mark of tax buoyancy during last 10 years since FY2005, its target of higher amount of revenue mobilisation cannot be achieved.
The government has set 27.6 per cent year-on-year tax earnings growth target to Tk 2.08 trillion for the next financial year.
The government has proposed to raise its revenue buoyancy to 2.04 per cent in the coming FY 2015-16 compared to only 1.1 per cent in the outgoing fiscal.
Tax buoyancy is an indicator to measure efficiency and responsiveness of revenue mobilisation in response to nominal Gross Domestic Product (GDP) growth of a country.
Zahid Hussain, lead economist of the World Bank Dhaka office, said: "It is really ambitious for Bangladesh to take its tax buoyancy to 2.2 per cent within a year. The government has not taken any exclusive measures which would help the tax buoyancy rate to go beyond 2.0 per cent."
For this, it would really be difficult to mobilise extra 29.5 per cent revenue in the next fiscal compared to the current year's estimation, he added.
The World Bank in its latest budget review report described the 29.5 per cent revenue growth target against the 13.5 per cent nominal GDP growth target in the next FY2016 highly ambitious.
The global lender said the government could earn Tk 1.06 trillion in revenues in the outgoing FY 2015 compared to its revised target of Tk 1.63 trillion.
Mr Hussain said although the finance minister has identified some areas like increase in the number of taxpayers to 3.0 million from the existing 2.2 million, settlement of the cases through Alternative Dispute Resolution (ADR) and boosting efficiency of the National Board of Revenue (NBR), it will be very difficult to achieve 29.5 per cent revenue growth within a year.
In addition, the government has already started backtracking from its imposition of higher Advance Income Tax (AIT) on imports and exports and supplementary or import duty on some other products. How wondered how such a large amount of revenue will be mobilised.
The lead economist at the WB's Dhaka office said tax buoyancy was the highest only once in FY2008 when the army-backed caretaker government was in power.
"Many businessmen and industrialists did pay higher taxes, and a lot of undisclosed money was whitened during that particular fiscal. So the revenue growth was the highest 26.4 per cent in the FY2008. After that, the growth rate has been lower," he added.
Finance advisor of the former caretaker government Mirza Azizul Islam said the government's revenue mobilisation target is 'unrealistic' as its higher income growth expectation is impractical considering the previous history.
"Since investment is stagnant, import growth is lower than expected. How the government would earn more than 27 per cent extra revenue in the next fiscal, he wondered. Besides, the government has still low tax-base. So it is an unrealistic target, he added.
Former NBR Chairman Abdul Mazid told the FE that the NBR's present capacity never showed that the tax buoyancy would go beyond 2.0 per cent rate.
The present business environment, glum political environment, lower tax-net, and lack of capacity of the NBR would never facilitate mobilisation of more than 27 per cent extra revenue in the next fiscal, he added.
The financial analysts, however, opined that if the business environment improves with the return of political stability in true sense, the NBR could expand its tax-net and simplify the tax payment system, achieving the targeted higher revenue growth would not be impossible.
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