Home ›› 16 May 2023 ›› Front
The National Board of Revenue (NBR) has finally devised a specific path with revenue measures to collect an additional Tk 20,400 crore VAT in FY24 through four channels, to meet the International Monetary Fund’s (IMF) $4.7 billion loan conditions.
NBR however acknowledged that maintaining stability in imports of raw materials and consumable items, lessening of the existing USD crisis, adequate supply of fuel to continue production are prerequisites for achieving this projected revenue.
IMF may help the NBR take capacity building projects and programmes by providing funds to ensure sustainability of initiatives for ensuring adequate logistic support and intensive training, finance ministry sources say.
Experts however pointed out that the NBR should focus more on income tax amidst the ongoing economic headwinds and soaring inflation, as VAT measures could put consumers under more strain.
Centre for Policy Dialogue’s (CPD) Distinguished Fellow Dr Debapriya Bhattacharya has expressed concerns over the rise of inequalities in countries where the IMF conditions were implemented.
Speaking at a programme in Dhaka on Monday, the economist said, “We noticed that when IMF conditions were enforced in certain countries, disparities worsened in those nations as the IMF sought to cement its authority.”
“I am urging the government to be more sensitive while implementing the IMF conditions. Action should also be to guarantee that the IMF’s requirements be met while preventing additional pressure on the underprivileged and national industry growth.”
In a recent meeting, the IMF mission had wanted to know the FY24 VAT measures with quantification of revenue impacts, but the VAT Wing could not share the exact information as it possesses no consumption data due to the presence of a huge informal economy.
Due to repeatedly being stressed by the IMF on the quantified revenue impacts of the fiscal measures, the NBR finalised the report for FY24.
On condition of anonymity, a senior official at the finance ministry said, “Considering the trend of collection till March 2023, it is expected, at the end of current FY23, Tk 1,23,500 crore may be collected by VAT wing of NBR.
“This means an additional amount of Tk 20,400 needs to be collected in FY24 to achieve the target.”
Ways to attain target
The NBR is going to collect the most from an additional VAT collection through budgetary and regular measures with Tk 12,400 – Tk 13,500 crore, followed by Tk 5,500 – Tk 6,000 crore by restructuring cigarette taxation, Tk 1,000 – Tk 1,500 crore by withdrawal of exemption or imposition of taxes, and Tk 400 – Tk 500 crore from EFDs and SDCs.
Besides, though the NBR is focusing on EFDs and SDCs to collect an additional amount, there is no progress to install more devices in the retail businesses.
The NBR contracted out the VAT collection services to Genex Infosys Ltd, with a target to mobilise revenue collection from the retail businesses.
However, not a single machine has been installed at retail businesses since signing of the memorandum of understanding (MoU) with Genex on November 3.
Imports, forex volatility key concern
In FY23, imports are already showing a negative trend which poses a threat to VAT revenue.
So, the stability of raw material imports and consumable items by tackling the forex crunch, and ensuring uninterrupted fuel supply to keep production running are a must to successfully collect the projected revenue, ministry sources say.
They added that about 40 per cent of total VAT revenue comes from the country’s production sector, and about 5 per cent comes from the trade sector.
VAT in the production sector is mostly dependent on imported raw materials, whereas revenue from the trade sector is dependent on imports of consumable items, as well as production of goods.
Financing requires sustainability
The lending agency may help to take programmes by providing finance on capacity building and increasing logistic support so that the revenue can be boosted.
To ensure the expected revenue growth, NBR officials need to be trained on tax expenditure analysis, revenue forecasting, audit, financial statement analysis, e-commerce, VAT assessment, return analysis, project management and procurement.
Apart from the training requirement, it should be noted that the NBR and its field offices are suffering from adequate logistic support to collect revenue, insiders pointed out.
