Concerns as NBR looks at wider revenue shortfall

Infographic: TBS

Economists have raised concerns over fiscal management as revenue shortfall against the target of the current fiscal year continues to widen further than initially anticipated and may hit Tk40,000 crore by the year-end. 

According to the National Board of Revenue (NBR) sources, the shortfall in revenue collection against the target is about Tk28,000 crore in the first nine months (July- March) of the current fiscal year 2022-23. 

If the shortfall continues to stretch, experts said, it could pose a serious challenge for the government regarding overall economic management because the government's bank borrowing has quadrupled in the first seven months of FY23 compared to the same period of the previous fiscal year.   

In addition, if the expected pace of revenue collection cannot be achieved, then it will be difficult for Bangladesh to meet the International Monetary Fund (IMF) conditions such as increasing the tax-to-GDP ratio in getting the next trenches of the $4.7 billion loans.

"Looking at the revenue collection growth, it seems there will be a shortfall of around Tk40,000 crore at the end of the fiscal year," Dr Ahsan H Mansur, an economist and executive director of the Policy Research Institute (PRI), told The Business Standard (TBS). 

"With the current tax structure, it will not be possible for the NBR to raise tax-to-GDP by 0.5% in the next fiscal as per IMF conditions. Some reforms may take three to four years to bear fruit," he added.

Although the growth in revenue collection has been on the decline for the past few months, the overall growth rate in March was close to 9%.

But a review of last year's revenue collection data of the NBR shows that this growth was almost double of current rate in the same period last year.

Mainly, several initiatives of the government to control imports and the lack of expected momentum in the local economy are the main reasons behind the decrease in revenue collection, according to people concerned.

Meanwhile, NBR Chairman Abu Hena Md Rahmatul Muneem held a day-long meeting at the capital's Agargaon revenue office with the senior officials at the field level to find the reason for the low revenue collection.

According to the sources of the meeting, Muneem has given several instructions to increase the collection in the remaining months of the financial year, which include the collection of arrears from various government institutions, and taking effective steps to prevent evasion.

According to NBR sources, duty-tax collection at the import level increased by 3.45% in the first nine months of the fiscal year compared to the same period last year, which was above 20%.

About 90% of the import tax collected by the NBR comes through the Chittagong Customs House. 

A senior official of the Chittagong Customs House, on condition of anonymity, told TBS, "Revenue collection was greatly hurt by the discouragement of the import of certain products such as vehicles, cosmetics, fruits and others. The import duty is higher on these products."

According to NBR data, the revenue collection in the first nine months of the current financial year was Tk2,26,751 crore against the target of Tk2,54,517 crore. 

A little over Tk25,000 crore has been collected on average every month. 

But, in order to achieve the target of Tk3,70,000 crore, an average of about Tk48,000 crore needs to be collected in the next three months, which is practically impossible according to economists.

Challenges with fiscal management

Muntaseer Kamal, a research fellow at the Center for Policy Dialogue (CPD), a research think-tank, told TBS, "As a result, some useful expenditures may have to be reduced."

Besides, recently foreign loans are on the decline. As a result, the budget deficit may widen slightly and loans from banks may increase, which may shrink private sector credit flows."

According to the data of Bangladesh Bank, the amount of government's bank loans in the seven months till January of the current financial year stood at Tk45,000 crores, which was Tk12,000 crores in the same period of the previous financial year.

A glimmer of hope in imports

It has been reported that imports are increasing through the Chattogram Port, the main import-export gate of the country.

A Chittagong Custom House official, wishing not to be named, told TBS that the import through Chattogram Port increased in March compared to the previous few months and the increasing trend continued in April."

Expressing the hope that imports will normalise in the next months, he said, "If that occurs, revenue collection from imports will also increase."