The shortfall in revenue collection fueled up government loans taken from banks, which is 47.11 percent higher than the same period of the previous fiscal year
The National Board of Revenue (NBR) has failed to meet its revenue collection target for the first quarter of the current fiscal year, falling nearly Tk15,000 crores short.
Sources at the finance ministry said the growth in revenue collection was 2.62 percent during the first quarter of the 2019-20 fiscal year – the lowest in the last eight years.
Ministry officials blamed the fall in both import and export of highly taxed items and lack of proper monitoring for the downtrend.
Meanwhile, the shortfall in revenue collection fueled up government loans taken from banks – which is 47.11 percent higher than the same period of the previous fiscal year, slowing down the private sector credit growth.
Speaking to The Business Standard, Habibur Rahman, additional secretary (Budget) at the Ministry of Finance, said that the government set its expenses keeping in mind the revenue collection target.
"Borrowing through national savings certificates and from banks is a common practice when revenue collection falls short," he added.
According to NBR data, the revenue collection in the first quarter stood at Tk47,388 crores, against a target of Tk62,229 crores. The deficit during the July-September quarter is Tk14,907.
The growth in revenue collection was 2.62 percent during the quarter, much lower compared to the average growth rate of nearly 10 percent for the first quarters of the last eight years.
The NBR had previously collected Tk46,223 crores in the first quarter of the 2018-19 fiscal year, against a target of Tk57,247 crores. Although the collection target has been raised by Tk5,000 crores, actual collection only edged up by only Tk1,115 crores.
The revenue board officials have been blaming Value Added Tax (VAT) waivers and the dull business scenario for the collection deficit.
They said the first quarter witnessed fall in exports compared to the previous year. Import of highly taxable items like cars, cement clinker and capital machineries have dropped. Besides, revenue collection fell in almost every sector including tobacco, banking and construction.
Therefore, the NBR could not fulfilled the target in the first quarter, claimed NBR officials.
NBR Chairman Mosharraf Hossain Bhuiyan said, "Revenue collection dropped slightly in the first quarter due to fall in import-export and the monsoon. The NBR will be able to fulfill its target by the end of the current fiscal year.
"The NBR gave VAT and tax waiver of Tk12,000 crores in the natural gas sector alone in this current fiscal year," Mosharraf added.
Revenue board sources said customs lagged this far behind in collection as import-export dropped, with the sector falling short of Tk6,107 crores with a negative growth.
Revenue collection from customs dropped 1.34 percent compared to corresponding period of the previous year.
VAT collection is also suffering from negative growth. The sector recorded a Tk6,429 crore deficit and a 0.86 percent negative growth due to waivers on natural gas, dull business, and failure to introduce online VAT collection system.
However, tourism and income tax posted a comparatively better scenario, with a growth rate of 11.65 percent. Collection from the sectors stood at Tk15,069 crores against a target of Tk17,440 crores.
Although the NBR is accusing dull business and VAT waivers for the poor collection, economists blamed the revenue board for its failure in enhancing its capacity.
Former caretaker government adviser AB Mirza Azizul Islam said, "National budgets set huge collection targets for the NBR, without considering its capacity. We have been witnessing this trend in the past couple of years, although the tax net is not increasing as per the expectations."
Shortfall in revenue collection is also affecting the banking and private sectors.
According to the Bangladesh Bank data, growth of the private sector declined to 10.66 percent in the July-September quarter, compared to the same period of the previous fiscal year.
Public credit growth and government credit growth recorded at 44.4 percent and 47.11 percent, respectively, in the first quarter of the current fiscal year.
Lack in revenue collection also hampered the implementation rate of the Annual Development Programme (ADP). The ADP implementation rate in the first quarter is 8.06 percent, while the year-on-year rate was nearly 9 percent.
Senior Research Fellow at the Centre for Policy Dialogue Towfiqul Islam Khan said, "The pace of revenue collection does not match with the economic growth claimed by the government. We need to stop subscribing to the VAT and tax waiver culture."
Echoing Mirza Azizul Islam, he also emphasised enhancing the capacity of the revenue board.