NBR urges Finance not to set unrealistic revenue target

The National Board of Revenue has requested the Ministry of Finance to set more realistic revenue targets for the next three fiscal years. 

In a letter to the Finance Division secretary, NBR Chairman Md Abdur Rahman Khan cautioned that revenue targets should be aligned with the country's economic growth and business activity. "Otherwise, as seen in previous years, the targets will remain unmet, leaving the NBR to take the blame for failing to achieve them," he said.

Rahman further noted that continually setting inflated targets and failing to meet them damages the NBR's credibility. He suggested a 15% revenue growth target above actual collections as a more realistic approach.

In the past, while some chairmen of the NBR informally stated in budget-related meetings that revenue targets should be realistic, this is the first time a chairman has sent a formal letter requesting that "unrealistic" targets not be set, according to current and former NBR officials.

Experts, while talking to TBS, have expressed mixed reactions to the NBR chairman's letter. While some have welcomed this stance, others believe that instead of advocating for lower targets, the NBR should focus on outlining the necessary steps to increase revenue collection.

The NBR chairman's letter, seen by TBS, stated, "The revenue forecast and projections for the next three years should be determined in alignment with the overall growth of revenue collection in previous years. The proposed revenue projections appear to be unrealistic and not based on proper research."

It added, "If targets are set without proper review and research, they will once again remain unattained at the end of the fiscal year, as has happened before." 

The letter emphasised the need to set revenue targets in line with the growth of the country's production and business sectors and to break free from the repeated failures of achieving revenue targets in past years.

'Country's economy has higher revenue potential'

Former NBR chairman Muhammad Abdul Mazid, said the country's revenue collection remains low compared to its GDP — just slightly above 7%, whereas it should ideally be around 15%. "This suggests that the economy has the potential for higher revenue collection, but it is not being fully realised."

He added, "Rather than merely urging about squeezing targets, the NBR should advocate for enhancing its capacity, increasing investment to enhance capacity, and ensuring that the government minimises excessive tax exemptions. These measures would help boost revenue collection."

Professor Mustafizur Rahman, prominent economist and a distinguished fellow of the Centre for Policy Dialogue (CPD), echoing the former NBR chairman said, "Proper reforms in the NBR, digitisation, and the elimination of loopholes by proper monitoring could further increase revenue collection growth." 

Ali Ahmed, a former NBR member, however, said, "The government has been setting large budgets and high revenue targets in its five-year plans to make the economy appear larger and gain recognition."

However, he noted that achieving these targets would have required a significantly higher actual economic growth rate—something that was not present. "As a result, the revenue targets have remained unattainable for the past decade."

Towfiqul Islam Khan, a senior research fellow of the CPD, welcomed the NBR chairman's initiative to estimate a more rational revenue target.

He said, "We have been suggesting that revenue targets, both revised for the ongoing year and programmed for the forthcoming fiscal year, should be realistic for many years. It should be ambitious but not overly lofty. 

"However, over the years, the then-Hasina regime followed a path of preparing unrealistic revenue mobilisation and public expenditure targets, which have undermined fiscal discipline."

Revenue targets never met in a decade

According to official data, since the fiscal year 2012-13, the NBR has never achieved the revenue targets set during the budget. In most years, the gap between the target and actual revenue collection ranged from 10% to 20%, forcing mid-year revisions to the targets. Even after these adjustments, the targets remained unmet.

However, an analysis of the 10 years prior to FY13 indicates that in at least four fiscal years during the period, the revenue targets were achieved. Even when there was a shortfall, it was mostly within a 1% to 5% range.

The average revenue growth rate has been around 15% for the last several fiscal years. However, revenue targets have consistently been set 30% to 40% higher — or even more — than the actual collection of the preceding fiscal year. As a result, in almost every year, the target has been revised downward towards the end of the fiscal year.

With an assumed 10% growth rate, total revenue collection for the current fiscal year is projected to reach approximately Tk4.2 lakh crore. If the target for FY26 is set at Tk5.64 lakh crore, the required growth rate would be nearly 35%. However, the NBR has never achieved such a high growth rate in the past.