IMF dissatisfied with BPC’s Tk22,000cr dues to NBR

A visiting team from the International Monetary Fund (IMF) has expressed dissatisfaction over the long-standing overdue amount of around Tk22,000 crore owed by the Bangladesh Petroleum Corporation (BPC) to the National Board of Revenue (NBR).

Additionally, the team disagreed with the NBR's collection strategy, sources say.

During a meeting with NBR officials at its Agargaon headquarters today (5 May), the IMF team asked for a clear roadmap for collecting the significant overdue amount, as per NBR sources present at the meeting.

Besides, the IMF team thinks the customs wing might not reach its import tax goals for the current and the upcoming fiscal years. So, the delegation suggested that the VAT and income tax wings should bear some of the load, contributing at least Tk8,400 crore, as per sources.

"The team expressed concern about the timing of the NBR's collection of the overdue amount [from the BPC], emphasising that it should have been collected much earlier," a senior NBR official who attended the meeting told The Business Standard on condition of anonymity.

"We informed them that we are trying to collect the amount through 'book adjustment', which would allow us to record it as collected revenue, thus aiding us in meeting our revenue targets set by the IMF," he added.

However, the IMF team was not satisfied with this explanation, stating that book adjustment would not result in actual revenue collection but merely shift numbers on paper without benefiting the state. The team plans to meet with finance ministry officials today to further discuss the issue.

Between 2013 and 2018, companies under the BPC failed to pay their dues, resulting in a significant outstanding amount. After the NBR issued a notice, the BPC was unable to collect the overdue amounts, prompting a request for intervention from the ministries of Finance, and Power, Energy, and Mineral Resources.

In early 2018, then-finance minister AMA Muhith decided to resolve the issue through book adjustment, but it has not been implemented over the last six years.

An NBR official explained that through book adjustment, the finance ministry will allocate the same amount to the BPC, which will then pay the NBR on paper, without any actual money changing hands.

The majority of the overdue amount is associated with the Large Taxpayers Unit (LTU-VAT).

Abdul Rashid Mia, additional commissioner and spokesperson of the LTU-VAT, told TBS, "Up to 2021, the overdue amount increased and stood at around Tk22,000 crore. However, since 2021, the companies under BPC have been paying their dues on time."

He added, "The companies collected the amount as VAT and supplementary duty from consumers during the supply of petroleum products but did not deposit it in a timely manner, leading to this significant overdue amount."

Petroleum products are among the highest import items by value and are a significant revenue source of the NBR. According to Bangladesh Bank data, Bangladesh imported petroleum products worth $12.86 billion in FY23, about 19% of the total imports.

TBS attempted to contact BPC Chairman Md Amin Ul Ahsan for comments on the overdue amounts but was unable to reach him by phone.

According to the BPC website, there are eight companies under the BPC currently involved in importing and supplying petroleum products.

Experts said the failure of government institutions to pay revenue is an unfair practice.

Dr M Masrur Reaz, chairman of Policy Exchange Bangladesh, told TBS, "It is difficult for BPC or Petrobangla to clear this significant overdue amount. Additionally, the method that the ministry is using (book adjustment) does not add any value to the fiscal system."

Dr M Abu Eusuf, executive director of the Research and Policy Integration for Development, said, "This is an issue of good governance. The responsible parties for this large overdue amount have not been identified, and no proper action has been taken, leading to this type of irregularity."

'IMF team believes customs can't achieve import tax target'

Considering current import tax collection trends, the IMF team believes the customs wing will not meet its import tax targets for the current fiscal year and likely not for FY2024-25 either. Given this situation, the IMF delegation emphasised that the VAT and income tax wings should bear some of the load, contributing at least Tk8,400 crore.

NBR sources said that the customs wing has a target to collect Tk118,000 crore for FY24 and Tk140,000 crore for FY25. However, due to import restrictions and other international issues, imports were not at expected levels, impacting import tax collection.

Consequently, the IMF team is concerned that the customs wing will fall short of its target of this fiscal year.

"In this situation, the IMF team requested that the VAT and income tax wings increase their contributions of at least Tk8400 crore," sources say.

An income tax official said on condition of anonymity that the tax wing already has a large revenue target for this fiscal year and next, so it will be difficult to take on additional pressure.