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FRIDAY, MAY 09, 2025
Is the revenue target realistic?

Budget

Abbas Uddin Noyon
06 June, 2024, 10:25 pm
Last modified: 06 June, 2024, 10:30 pm

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Is the revenue target realistic?

In these challenging circumstances, the government has ambitiously set a revenue target of Tk5.41 lakh crore for fiscal year 2024-25, representing a 13.2% increase from the revised target for the outgoing year

Abbas Uddin Noyon
06 June, 2024, 10:25 pm
Last modified: 06 June, 2024, 10:30 pm
Representational image. Photo: Collected
Representational image. Photo: Collected

 Macroeconomic indicators are on a downward trajectory, marked by persistent high inflation, declining forex reserves, and a liquidity crunch in the banking system. Export earnings and inward remittances show negligible growth, while private investments remain stagnant at around 23% of GDP. High inflation has also slowed down consumption.

 In these challenging circumstances, the government has ambitiously set a revenue target of Tk5.41 lakh crore for fiscal year 2024-25, representing a 13.2% increase from the revised target for the outgoing year. 

 However, economists are sceptical about its achievability, given the current economic climate and past trends.

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 Fahmida Khatun, executive director of the research organisation Centre for Policy Dialogue (CPD), said that setting targets, particularly in revenue, should be based on economic reality and past trends. 

 She criticised the current revenue target for not considering these factors, making it seem unrealistic.

 "With the challenges the economy is currently facing, achieving significant revenue growth is not feasible, even if desired," Fahmida Khatun added.

The National Revenue Board (NBR), responsible for a significant chunk of the target (Tk4.80 lakh crore), has fallen short in the ongoing fiscal year.

With only two months remaining, the NBR has collected Tk2.89 lakh crore, leaving a projected shortfall of at least Tk82,000 crore, according to the CPD.  

Initially set at Tk4.30 lakh crore, the NBR's revenue collection target for the current fiscal year was revised to Tk4.10 lakh crore due to slower-than-expected growth. Based on the CPD's projections, the NBR may end up collecting Tk3.48 lakh crore by the fiscal year's end.

To achieve the next fiscal year's target, the NBR will need to achieve a growth rate of 37%, the highest since the emergence of the country. The previous peak was 16% in 2017, attributed to economic stability.

Economists view this target sceptically, especially amid ongoing crises, labelling it a "fantastical target."

Finance Minister Abul Hassan Mahmood Ali stood by the target during his budget speech, citing considerations of the global political situation and domestic macroeconomic conditions.

He pledged to modernise the revenue sector through digital transformation, broaden the tax base, increase non-tax revenue, and improve administrative efficiency to ensure sufficient resource mobilisation.

To meet the NBR's revenue collection target, specific goals of Tk1.78 lakh crore each have been set for VAT and income tax.

Given the revenue trends in these sectors over the first ten months of the current fiscal year, the NBR will need to achieve a growth rate of over 36% in the next two months and the upcoming fiscal year.

Economists are also concerned about the government's ability to meet its non-tax revenue targets, despite the finance minister setting lower goals for the next fiscal year compared to the current one.

Former Internal Resources Division Secretary Abdul Majid also expressed doubts about achieving the revenue collection target for the next fiscal year.

He pointed out that according to the World Bank's forecast, GDP growth will be 5.6%, suggesting that revenue will not increase unless GDP growth does.

Abdul Majid noted the absence of visible reforms to achieve the revenue target. He stressed the need for technological, administrative, and legal structural reforms, particularly the implementation of a paperless and transparent tax system.

In the past decade, Bangladesh's revenue collection has typically grown by 10 to 13%, but the current budget predicts a much larger increase of 30 to 40%.

This stark contrast between government expectations and actual achievements has led economists to conclude that there's a significant gap between ambition and reality.

Former NBR member Farid Uddin highlighted the rampant tax evasion in Bangladesh, resulting in lower revenue collection compared to the country's GDP size and growth rate. He suggested that Bangladesh should aim for a tax-GDP ratio of at least 17% to address various development needs.

Macroeconomic / revenue / Bangladesh National Budget 2024-2025

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