Finance Division is frustrated over revenue-GDP ratio as the country didn’t improve in this parameter at all over the years.
Although the government has taken an ambitious target to raise the revenue-GDP (Gross Domestic Product) ratio to 24.1 percent as it aims to achieve the developed nation status by 2041, officials of the Cash and Debt Management Committee (CDMC) said.
A recent Cash and Debt Management Committee meeting minutes revealed that the frustration about the poor revenue GDP ratio. In the meeting Senior Finance Secretary Abdul Rouf Talukder said, “We are holding the lowest positing in the world in terms of revenue-GDP ratio.
Our middle income country dream will not become true unless country’s revenue GDP ratio improves.”
He said, “It is irrational for the National Board of Revenue not to withdraw five percent tax on interest on treasury bill bond.”
“Bangladesh Bank will review the matter if the development of the country’s secondary bond market is hampered due to levying of five percentage tax on interest earning on treasury bond,” he said.
A General Economics Division (GED) study revealed the rapid pickup will be needed to keep the revenue-GDP ratio at an average 18.50 per cent rate annually over the 20 years through fiscal year 2041.
Economist and former IMF adviser Dr Reza Kibria has criticized the ambitious target, saying it will be difficult to expand the country's internal resources during the period.
He said, “Tax should not increase without reducing income inequality of people in the country.”
“More tax should be levied on rich people rather than the poor and lawmakers show little wealth in their wealth statement submitted to the Election Commission,” he said.
The GED has recently formulated the Perspective Plan 2041 for Bangladesh to graduate the country's position.
Bangladesh is one of the least-taxed economies in the developing world as its tax-GDP ratio hovered between 9.0 and 10 per cent of GDP during the last five years.
The government’s revenue should rise with a rising GDP but in case of Bangladesh, that is not the story. Whereas Bangladesh's neighbours India and Nepal's average tax to GDP for the last 10 years were 15.8% and 19.6% respectively, its only 8.7% in Bangladesh; which is very low comparative to its GDP growth.
In FY2020, Bangladesh's year-on-year Revenue-GDP ratio failed to cross the 10 per cent band.
Meanwhile, the country has failed to fulfil the target to lift the total revenue-GDP ratio to 16.1 per cent in 2020 when the last perspective plan ended.
The GED had set the target for raising the ratio of revenue to GDP to 16.1 per cent in FY2020. Due to the deficit of the budget the government was borrowing heavily from banks and the borrowed amount has risen to Taka 81,000 crore already for meeting the budget deficit due to dismal revenue collection.
The revised target of government borrowing for this fiscal year was Taka 72,953 crore.
As per the Global Infrastructure Hub report, Bangladesh needs $608 billion of investment in infrastructure sectors - water, electricity, telecom, ports, airports, rail and road - from 2016 to 2040.
However, current trends indicate $417 billion of investment is possible in the aforementioned sectors, thereby leaving a gap of $192 billion in investments in the period 2016-2040.
The shortfall in the top three sectors, power, telecom and water sectors, amounts to $100 billion, $41 billion, and $40 billion respectively.
The Bangladesh Bank show that total turnover of the secondary trading of the t-bills and t- bonds stood at Taka. 282.91 billion in 2017 while the value was Taka. 514.08 billion in 2016.”
ask/wi
