The contribution of income tax revenue collection decreased to 2.54 per cent of the country’s overall gross domestic product (GDP) in FY23, at a time when the National Board of Revenue (NBR) is under pressure to increase the tax-to-GDP ratio for macroeconomic stability.
In the just concluding FY, the NBR collected Tk 1,12,920 crore, which is 2.54 per cent of the country’s Tk 44,39,273.3 crore GDP.
The NBR had earned Tk 1,03,791 crore in FY22, which is 2.61 per cent of the country’s GDP, show latest provisional data from the NBR and Bangladesh Bureau of Statistics (BBS).
Due to economic headwinds triggered by the Russia-Ukraine war, corporations and business establishments could not regain their previous positions after Covid, which caused a deficiency in the revenue collection, claimed NBR officials.
Besides, a decrease of imports abated domestic production and the overall business profits. Peoples’ purchase capacity shrunk due to the high inflation Bangladesh witnessed during the last FY, which is also a cause of the lesser contribution to tax to GDP, insiders said.
Meanwhile, the NBR will face significant pressure in the ongoing financial year, mostly to meet the International Monetary Fund’s (IMF) $4.7 billion loan conditions. One of the IMF conditions is that Bangladesh has to increase the tax-to-GDP ratio by 0.5 percentage points in FY24.
According to NBR sources, as per the condition, IMF has asked to collect income tax of Tk 1,37,780 crore in FY24, and repeatedly asked the NBR to chalk out how this revenue can be collected.
The NBR then devised a specific path with revenue measures to collect an additional taka more than Tk 1,12,920 crore to Tk 1,37,780 crore, to meet the IMF’s condition.
NBR shared in their plan sent to the IMF that the income tax revenue collection witnessed a hefty growth of 14.11 per cent in every financial year except FY20 due the Covid pandemic.
“If the same type of growth is achieved, the revenue will normally be Tk 1,32,253 crore. NBR has planned differently to collect the remaining Tk 5,547 crore,” it had added.
According to the plan, Tk 3,000 crore will be collected from land registration, Tk 500 crore from tourism, Tk 300 crore from tobacco sector, Tk 150 crore from environment surcharge and Tk 250 crore from widening the tax net.
Officials say this plan is already being executed by bringing related provisions, including an increase of travel tax, land registration cost, and incorporating environmental surcharge on multiple cars in the budgetary measures for FY24 and in the new Income Tax Act 2023 to boost collections.
Apart from that, the tax collection will be gradually increased through not to give new special exemptions and a gradual reduction of the existing exemptions, a gradual increase in tax rates, widening tax net, Document Verification System (DVS) and enhancing digitisation of tax administration, it added.
The NBR will also have to increase the tax-to-GDP ratio by 0.5 percentage points in FY25, and 0.7 percentage points in FY26. To achieve the IMF target, the NBR will have to collect an additional Tk 2.34 lakh crore over the three fiscal years, beginning from this financial year.
