NBR making inroads on national self-reliance

Bangladesh has consistently been on the upswing in revenue growth which is ultimately pushing the country’s gross domestic product (GDP) up significantly.

In the first financial year 1972-73 following the country’s independence, the National Board of Revenue (NBR) collected Tk 166.30 crore, which shot up to Tk 2.56 lakh crore in FY2020-21.

The latest 2020 data shows that government revenue amounts to approximately 9 per cent of the nation’s gross domestic product.

Experts said the government reliance on the revenue occurred in the 1990s, since when the government earning started to play a key role in shaping GDP.

Talking to The Business Post, former NBR chairman Abdul Mazid said the dependency on revenue earning started in the 90s as foreign direct investment plummeted.

“In the first decade after independence, particularly in the 70s, it was a period of rehabilitation and reconstruction for Bangladesh when revenue earning was not a big issue,” he said.

“In the period of 1980-90, Bangladesh’s economy fetched FDI while dependency on revenue earning was also not a crucial subject then.”

The NRB former chair observed that one development happened that time, and it was the introduction of Income Tax Ordinance in 1984.

The contribution of revenue earning to the GDP came into the limelight in the 90s when Bangladesh started to see economic growth.

That time earning from VAT began as the garment and other industries initiated operation. Because of the declining trend of foreign aid, domestic earning gathered pace at that time.

Till 2008 earning from revenue paralleled the economic pace. Since 2009 it has been increasing in tandem with the GDP growth, according to the expert.

“However, revenue does not appear to have grown that much as does the economy. Compared to the neighbouring country, our tax- GDP ratio is not satisfactory,” he pointed out.

The NBR said with the increasing number of direct tax, revenue figure is on the rise, and income tax is one of the major components for tax revenue.

The income tax data shows that the direct tax or income tax has increased by more than 25 per cent -- from 9.72 per cent in FY1972-73 to 35.50 per cent in FY2019-20.

In addition to income tax, there are two other major sources of revenue—value added tax (VAT) and customs duty. 

According to the revenue experts, the government dependency on the FDI for development projects is declining.

NBR Chairman Abu Hena Md Rahmatul Muneem on the occasion of National Income Tax Day on November 30 this year said, “It is a great

achievement for us that more than 90 per cent of the development projects in the country at present are being financed from our national revenue collection.”

“The NBR has been working to increase the total tax net as part of which we are now providing an online return submission service,” he added. 

There was a time when the government had to think of FDIs before planning any development project in the country and in those cases, there were many conditions from donor countries to be met up.

Former NBR member Md Alamgir Hossain said, “We have seen good growth in revenue sector over the last 50 years. But it is true that the growth did not get pace as was expected.”

“We cannot evaluate growth by only earning revenue. The NBR has given tax exemption to various sectors to facilitate growth of industries as well as economic growth.”

NBR officials say when the whole system will be digitised, there will be massive growth in revenue earning and tax-to-GDP ratio will also increase.

Asked about it, Policy Research Institute’s Executive Director Ahsan H Mansur told The Business Post there is no major change in the NBR’s revenue collection system.

“The structural formation has not been done. The economy as well as the revenue is growing naturally. But the ratio at which revenue should rise is not noticed,” he said.

The researcher suggested reforming the NBR following instances of other developed countries, and said the revenue authority should focus only on revenue collection, not on revenue policy.

“In the last 50 years, the NBR has failed to make storage of information about taxpayers,” argued Mansur.