Roadmap on raising revenue required

Despite falling short in achieving the revenue target in the first eight months of the current fiscal, the government has set a higher revenue collection target for the next fiscal. The government aims to earn Tk 4,33,000 crore in revenue in the next fiscal, which is 9.8 per cent of the GDP and 11 per cent higher than the target set for fiscal 2021-2022, according to a report published in The Business Post on Monday. A meeting of the coordination council on budget management, finance and currency exchange rate on Sunday, chaired by Finance Minister AHM Mustafa Kamal, set the revenue targets in different heads and the subsidies for the next fiscal year. Bangladesh Bank Governor Fazle Kabir and Finance Secretary Abdur Rouf Talukder were also present with senior officials. The target set for the National Board of Revenue (NBR) has been Tk 3,70,000 crore (8.4pc of GDP), while the non-NBR revenue collection goal has been set at Tk 18,000 crore (0.4 pc of GDP). The target for non-tax revenue has been fixed at Tk 45,000 crore for the next fiscal. In the current fiscal, which ends on June 30, the target for revenue collection by NBR has been Tk 3,89,000 crore, while Tk 16,000 crore has been targeted to earn from non-NBR sources, the target for non-tax revenue being Tk 43,000 crore. In the first eight months of the current fiscal, the NBR managed to collect only 53.47 per cent of the yearly target. NBR has to collect Tk 3,385 crore each in the remaining months to achieve the target, which is unrealistic.

However, if compared to achievements of the previous fiscal, there were increases in certain areas. Tk 66,378 crore was collected from the local level VAT and supplementary duties during the first eight months of the current fiscal, marking a 10.65 per cent growth over the same period of last fiscal year. On the other hand, revenue collection at the import level witnessed an increase of 22.79 per cent to Tk 56,776 crore during the period. Tk 52,854 crore came from income tax or direct tax, marking a 13.28 per cent growth.

The higher revenue target has been set to finance a budget worth Tk 6,77,864 crore, which includes Tk4,31,864 crore, or 15.4 per cent of GDP, in revenue expenditure Tk 2,46,207 crore, or 5.6 per cent of GDP, in development expenditure (Annual Development Programme-ADP). The expenses will include significant subsidies for the agriculture and energy sectors. As was done before, the highest allocation is not going to the agriculture sector this time. Instead, the power sector will receive the most funding, followed by LNG and agriculture. The government intends to spend Tk 57,045 crore in subsidies for the power, liquefied natural gas (LNG), agriculture, and food sectors. The increased allocation will be 72.8 per cent higher than the amount (Tk 33,000 crore) earmarked for the current fiscal. ‘‘Subsidy is going to be the real game-changer in the next budget. Huge subsidy burden may bloat the budget deficit in both current and next fiscal years,” an additional secretary of the finance division under the finance ministry was quoted as saying by The Business Post.

As always, officials concerned expressed their optimism about achieving the new target given the momentum created in the economy during post Covid-19 pandemic period. The government sets high revenue targets each year. Still, it falls significantly short in achievements forcing a revision at the end of the fiscal year. The notion that setting a higher target leads to higher achievement even if the target is not achieved may also work in the minds of policymakers. But the government needs to develop a clear roadmap on how it’s going to move forward to get close to the target, if not achieve it.