NBR's revenue shortfall widens further, hitting Tk4,000cr in Oct

The gap between revenue collection and targets set for it has been widening, with October's shortfall alone reaching Tk4,123 crore, expanding from the Tk8,000 crore shortfall recorded in the preceding three months.

Infographic: TBS

In October, the collection amounted to slightly over Tk27,000 crore, falling short of the Tk31,000 crore target, according to the National Board of Revenue (NBR).

Officials attribute the challenges to import restrictions resulting from the dollar crisis, which hinder import tax collection. Additionally, domestic revenue collection fell below expectations due to sluggish economic growth and the NBR's limited capacity to curb tax evasion.

Experts say the collection target will increase in the coming months. However, the economy is not performing as expected. This divergence may lead to a further increase in the shortfall, posing a potential threat to the NBR's ability to meet not only its own targets but also those set by the International Monetary Fund (IMF).

According to data from the NBR, revenue collection from import tax, value-added tax (VAT), and income tax totalled less than Tk1.04 lakh crore in the last four months, against the target of over Tk1.16 lakh crore.

In the July-October period, revenue grew by 14% year-on-year. During this time, the growth rates for VAT and income tax were 17% each, whereas growth in import tax lagged behind at only 9%.

Md Lutfor Rahman, formerly a member of customs policy at the NBR, attributed the decline in imports to both a shortage of dollars and rising dollar costs.

"The growth in import tax is primarily attributed to the surge in the cost of imported goods rather than an actual increase in imports," he told The Business Standard.

The accuracy of this statement is affirmed by the central bank's statistical review. According to data published by the Bangladesh Bank on 23 November, the opening of letters of credit (LC) for imports decreased by approximately 12% in the four months from July to October, with LC settlements falling by 24%.

During a recent visit to Dhaka, an IMF team agreed to lower the revenue collection target for the current financial year to comply with the IMF's $4.7 billion loan condition.

Achieving the revised target would necessitate 19% growth. However, the Customs Department has expressed concern, stating that meeting the target might be challenging unless the pace of existing imports is accelerated.

On 27 November, NBR Chairman Abu Hena Md Rahmatul Muneem met with field-level officials to assess the revenue collection situation. Sources from the meeting said officials were directed to devise strategies to meet the collection target, enhance the collection of revenue in arrears and unresolved cases, and implement effective measures to prevent evasion.

For fiscal 2023-24, the NBR's revenue collection target was set at Tk4.30 lakh crore, compared to a collection of just over Tk3.30 lakh crore in the previous financial year.

To meet this ambitious target, the NBR will need to achieve an average monthly increase of approximately 30% in its revenue collection.

Ahsan H Mansur, executive director at the Policy Research Institute, contends that achieving such a high rate of revenue collection is not feasible amid the current realities.

Speaking to TBS, he pointed to a lack of capacity within the NBR, coupled with a sluggish economy and political unrest.

According to Mansur, the NBR has struggled to implement necessary reforms aimed at boosting revenue collection, making it unlikely to meet the set targets.

He expressed his doubts, suggesting that even the lowered targets set by the IMF may be unattainable.