Home ›› 27 Apr 2023 ›› Front
The visiting International Monetary Fund (IMF) team has sought from the National Board of Revenue (NBR) the specific tax measures that will be taken in the upcoming budget and the estimated increase in revenue resulting from those that will help Bangladesh meet the $4.7 billion loan conditions.
The NBR, however, could not give any estimation or exact data due to a lack of integration with other government de-partments and the existence of a huge informal economy.
Besides, it did not disclose the FY24 budgetary measures to the global lending agency, terming those secret and also saying there is no way to reveal those unless approved by parliament, NBR officials told The Business Post following a meeting with the IMF team on Wednesday.
A five-member IMF staff consultation team led by Rahul Anand, division chief in the IMF’s Asia and Pacific Department, is currently in Dhaka on a 13-day visit to review the country’s progress in meeting the 38 loan conditions. The team will stay here till May 7.
Though the NBR could not give any estimation or exact data, it told the IMF the budgetary measures it takes usually in-crease revenue by around 15 per cent every year. It also said the initiatives it usually takes include widening the tax net, curbing tax evasion, and strengthening automation and administration.
One of the IMF conditions is that Bangladesh has to increase the tax-to-GDP ratio by 0.5 percentage points in FY24, 0.5 percentage points in FY25, and 0.7 percentage points in FY26. To achieve the target, the NBR will have to collect an addi-tional Tk 2.34 lakh crore over the next three fiscal years.
Govt against raising tax rate in election year
The IMF mission recommended raising the existing tax rates imposed on marginal taxpayers, saying those are higher in other countries compared to Bangladesh.
But the NBR tax wing said there is no way to do that amid the ongoing economic headwinds and that the tax-free income limit could even be increased in FY24.
Its officials said this is the election year and there is a chance that the government will not increase taxes as doing so may affect political stability and also because the final decision in such matters comes from lawmakers.
Instead, the NBR will take measures to widen the tax net, they added.
Customs entangled with huge absolute dues
At the meeting, the NBR customs wing said it cannot reach the revenue collection target due to absolute dues, adding Petrobangla had outstanding customs duty of Tk 7,938 crore until January 24 this year.
Its officials said there is no coordination between different government bodies, which is why some policies do not see the light of day. They urged the IMF team to discuss the matter with the ministries and departments concerned. “For the first time, we described the harsh reality to the IMF, explaining why the NBR cannot collect the required taxes and duties,” an official of the revenue board said.
He said a 0.5 percentage point increase in the tax-to-GDP ratio is challenging because the ratio dropped to 7.8 per cent now from around 10 per cent due to the revised GDP baseline.
“That is why it is tough to increase the ratio as per the IMF conditions because though GDP grows every year, the NBR gives exemptions for capital machinery imports, which accelerates GDP growth. We cannot withdraw policy support from areas that help the economy grow,” he added.
During the July-February period of this financial year, the NBR allowed tax exemptions of Tk 6,710 crore for capital ma-chinery imports.
VAT wing has no exact consumption data
The IMF mission also wanted to know the FY24 VAT measures, but the VAT wing could not share the information as it has no consumption data due to the presence of a huge informal economy.
Besides, the VAT wing said some measures are taken during a crisis and that is why there is no way to say now how those will affect revenue collection. Giving an example, they said the NBR withdraws or cuts VAT on essential commodities like edible oil to keep prices under control amid soaring inflation.
NBR officials told the IMF the revenue board takes budgetary measures to withdraw policy support in some sectors and increase that in areas from where more VAT could be collected.
Despite this, the VAT wing saw more than 15 per cent growth during the July-March period of FY23 defying all odds, they added.
