Tax collection not increasing as NBR apathetic to reforms: State minister

Allocations to priority sectors are not increasing in proportion to GDP growth as revenue collection is not increasing due to the National Board of Revenue's lack of interest – among other things – in reforming the tax system, said State Minister for Planning Dr Shamsul Alam yesterday.

"The NBR cannot be held solely responsible for not collecting the expected amount of revenue. However, it lacks interest in taking forward reform measures," he added at a round-table on "Budget Deficit and Inflation Challenge", organised by the Editors Guild in the capital.

Stakeholders have long been calling for increasing revenue collection in proportion to the GDP growth, he noted, adding that the proposed budget announces levying a minimum tax of Tk2,000 on filing income tax returns to expand the tax net.

He said allocations and investments in different sectors are increasing every year in terms of money, even if they are not increasing in proportion to the GDP growth rate.

Professor Dr Selim Raihan, executive director of the South Asian Network on Economic Modeling (Sanem), said the initiative to control inflation and bring the overall economy on track was more necessary than showing the dream of a big GDP growth.

He said there are no specific measures in the budget proposed for FY24 regarding problems in the revenue system, crisis in the banking sector, fiscal and monetary policy to control inflation, and market management. 

He also said the government aims to increase private sector investments to expedite economic growth. But at the same time, it has set a target to spend a huge amount from the banking sector. There is no coordination between these two goals.

Experts prefer stability over growth

Dr Mohammad Abdur Razzaque, chairman of Research and Policy Integration for Development, said people will appreciate if the budget for FY24 emphasises stabilisation instead of focusing on a big growth. Many important issues are being ignored by setting a target of 7.5% GDP growth.

Considering that Bangladesh may lose some advantages after graduating from the Least Developed Country (LDC) status, foreign investment in the country will drop. Foreign entrepreneurs also fear it will not be easy to get appropriate return on investments here due to the drop in the country's foreign currency reserve, Dr Mohammad Abdur Razzaque continued.

He also urged the authorities concerned to increase revenue collection to implement the budget.

Sheikh Fazle Fahim, former president of the Federation of Bangladesh Chambers of Commerce and Industries (FBCCI), said the pressure of inflation and currency devaluation has increased since the outbreak of the Covid-19. Achieving 7.5% GDP growth will be difficult by overcoming these crises.

"Import of capital machinery has decreased. Cost of funds will increase in the future. Besides, there are limitations in reserves in months of imports, exchange rates and port capacity," said the business leader.

He also emphasised boosting tax collection by reducing the tax rate and expanding the tax net. Reforming the tax system and modernising the National Board of Revenue are necessary for these purposes.

Mentioning that not all the VATs and duties collected in the country are deposited to the government treasury, he said the "package VAT" was lifted in 2019, it is still being collected at the field level.

 "If the package VAT is not going to the government fund, where is it going?" He asked.

Meeting VAT, customs duty target difficult without reform

Abdul Kafi, former commissioner of National Board of Revenue's Large Taxpayers Unit, said meeting the income tax collection target set in the proposed budget might be possible, but it will be difficult to meet customs duties and VAT collection targets due to lack of expected changes in the system.

He also said no matter how high the target is, the tax collection grows by 15%-16% every year. It will not be possible to increase it further if reforms are not given importance.

He alleged that the authorities concerned never take the National Board of Revenue's opinion before setting the tax collection target.

In reply to that, State Minister for Planning Dr Shamsul Alam said revenue authorities are called along with various other parties at the beginning of the budget formulation.

"The National Board of Revenue does not take initiatives to implement the reform measures mentioned in the government policies, and the Five-Year Plan. What suggestions can they make other than those reform measures?" he asked.

Md Afzal Karim, managing director of the Sonali Bank, said, "Default loan is a legacy, which has been there for a long time. The ratio of non-performing loans currently stands at 8.8%, which was above 10% a year and a half ago. Currently, the amount of defaulted loans appears to be large as the total amount of loans has increased."

He also said the government's plan to borrow around Tk1.32 lakh crore from the banks to meet the budget deficit will not create any crisis in this sector.

Low allocation for slow project implementation

Professor Dr Syed Golam Faruque, former Director General of the Directorate of Secondary and Higher Secondary Education, said even if we did not have the capacity to spend at least 6% of the GDP for the education sector as per the Unesco standard, a gradual decline in the allocation for this sector was disappointing, because the government has a plan to increase it progressively.

He also said it was not possible to increase the expenditure on education due to the slow implementation of the projects in this sector.

In a similar tone, public health expert Dr Abu Jamil Faisel said allocation to the health sector is shrinking instead of increasing due to the lack of capacity to spend.

He said funds are not released on time for procedural complications. Payments are delayed to ensure the quality of work.

He also said there is a lack of quality in private healthcare services. There is no system to monitor the quality of their services, while they keep on charging treatment seekers arbitrary fees.

People's out-of-pocket expenditure for getting treatment is increasing due to a shortfall in government investment along with the increase in fees in private hospitals, he added.

Referring to the drop in allocation for education as compared to GDP, State Minister for Planning Dr Shamsul Alam said allocation for different sectors had to be reduced to allocate more to the health sector to meet the unexpected expenses caused by the Covid-19 pandemic.

He further said there has been a huge improvement in education in the last few years in terms of number, but the sector has been lagging behind in terms of quality due to the lack of skilled manpower.