NBR plans to earn additional Tk22,690cr through source tax in FY25

The National Board of Revenue (NBR) aims to collect an additional Tk22,690 crore in source taxes in the upcoming fiscal year for more efficient attainment of this target in line with conditions set by the International Monetary Fund for the $4.7 billion loan package.

According to NBR sources, the board has prepared a roadmap for tax collection going forward, where it aims to collect Tk22,690 crores or 85% of the target additional revenue as TDS in the next financial year.

Out of them, the tax wing of the revenue board targets at collecting Tk1,000 crore by limiting tax exemption, Tk500 crore by improving tax compliance, Tk200 by new outreach of taxpayers, and Tk500 crore by internal and external integration as major sources.

Besides, the board wants to collect an additional Tk1,300 crore by improving auditing of withholding returns, introduction of online corporate income tax return submission, improved audit and taxpayers service.

The board also sought additional logistic support, including manpower, to achieve this goal, said the sources.

However, experts do not agree with the plan to collect additional tax from TDS as a simple method. They said, as a result, the tax burden on existing taxpayers may increase.

Muhammad Abdul Mazid, former NBR chairman, told The Business Standard, that collecting source tax is easy because by increasing the rate and increasing some fines, more can be collected through this method.

"However, the method is not logical as it puts more pressure on existing taxpayers. Rather, the board should create a way to collect additional revenue from new taxpayers by increasing them," he added.

The NBR collects income tax as TDS from over 50 sectors, which accounts for around 60% of the total income tax collected. It included imports, contracts, savings and fixed deposits interest, employment income, non-resident income, property transfers, export proceeds, and certain services payments, among others.

The revenue board in FY23 collected about Tk70,000 crore of income tax through TDS. For the current financial year, it aims to increase this to Tk83,000 crore, according to NBR sources. 

Additionally, for the next financial year, the target is set at Tk1,06,000 crore to be collected through TDS, increasing its share in the total revenue to 65%.

IMF conditions for NBR 

A delegation from the IMF is scheduled to arrive in Bangladesh on 24 April to assess Bangladesh's progress in meeting the conditions required for approving the third instalment of a $4.7 billion loan. During their visit, they will meet with relevant stakeholders to review Bangladesh's compliance with these conditions.

As part of the progress review, officials from the income tax and VAT wings of the NBR will convene for a meeting on 28 April, where they will present the tax collection plan for the upcoming year, according to a senior NBR official.

One of the loan conditions set by the global lender is to increase the tax-to-GDP ratio by 0.5% annually, a target that the NBR failed to achieve in the first year.

Additionally, among the six major conditions outlined by the IMF, three require to be implemented within the current fiscal.

These conditions include establishing Compliance Risk Management Units in the NBR's customs and VAT wings, developing and adopting a Tax Compliance Improvement Plan, and adopting a Medium-Term Revenue Strategy.

NBR sources said, while Compliance Risk Management Units have been established, their activities remain largely unseen, and progress on the other two conditions is yet to be observed.

However, an NBR official, speaking anonymously, said there has been significant progress in the Medium and Long-Term Revenue Strategy and expects its implementation within the current fiscal year.