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Sunday, June 16, 2019

Budget lacks spl measures

Kazi Zahidul Hasan  :
The National Revenue Board (NBR) will face an uphill task of collecting tax-revenue in line with the budgetary target in the wake of several macroeconomic challenges and lack of reforms, according to a former revenue board chairman.
"The target is achievable but challenging given the current macroeconomic situation and lack of administrative and tax reforms," former NBR Chairman Dr  MA Mazid told The New Nation.
The Finance Minister in the proposed budget for the fiscal year 2019-20 projected total revenue earnings at Tk 3,77,810 crore. Of the amount, the NBR is to mobilise Tk 3,25,600 crore.
The growth of NBR's revenue collection has been projected at 18 per cent higher than the revised receipt of the outgoing fiscal.  
"Meeting the revenue collection target is seemingly challenging since NBR managed to achieve 7.24 per cent year-on-year growth in revenue collection in the first ten months of the outgoing fiscal year," said Dr MA Mazid.
The cumulative revenue collection by the NBR stood at Tk1, 73,422crore in July-April against the revised target of Tk 2,80,630 crore for the outgoing fiscal.
Earlier, the NBR's revenue collection shortfall reached Tk 50,000 crore shortfall in July-March period of the fiscal year 2018-19.
"The NBR is likely to face the highest ever revenue shortfall in the fiscal year (2018-19) owing to declining import as a result of sluggish economic activities, banking crisis and tax exemption and evasion," he said.
Dr MA Mazid also observes the government set an ambitious revenue collection goal for NBR that also led it to face the shortfall.
In the next fiscal year (2019-20), the body has been tasked with collecting Tk 3,25,600 crore (a rise of 18 per cent over this fiscal year's revised target) and precisely how that will be achieved remains a big question, he said.
Dr MA Mazid cited that the budget lacks special measures to boost revenue collection in line with its target. On the other hand, in its old structure, the NBR lacks capacity and the much needed dynamism to achieve this target.
An official data shows the average revenue collection growth in the last five years was 14.28 per cent.
"There is no structural and policy change to achieve the target. Even, there are systemic loopholes and administrative weakness which may also hurt the revenue collection," he noted.
Dr Mazid points out that the economy needs to perform better to achieve a higher revenue growth. But sluggish pace of ADP implementation, private investment, import and corporate earnings, especially by commercial banks, indicates that the economy lacks the much-needed vibrancy. "So, the NBR will face daunting task fulfil the revenue earning target given the prevailing macroeconomic situation," he added.
Replying to a question, Dr MA Mazid said, the NBR may face the revenue shortfall even if the proposed budget announces to enroll the new VAT law from the first July.
"Enrollment of new VAT law will not yield much benefit in mobilizing additional revenue rather it will create chaos and irregularities in the system."
He said the government was forced to introduce multiple VAT rates under the pressure of business community making it a faulty one.
"Even, it lunches the law without taking necessary preparation and making the businesses and consumers much aware of it. This can also affect the NBR's expected revenue collection in the next fiscal year."  
Dr MA Mazid appends that in the government would continue to rely on heavy bank borrowing to meet budgetary expenditure and the fiscal deficit due to revenue collection shortfall. "The government has to make serious efforts to improve capacity of the revenue administration and bring more people into the tax net to overcome the challenges of revenue shortfall. At the same time, it should take stringent measures against the tax dodgers and curb the menace of under and over invoicing in export and import trade to raise the overall tax-to GDP ratio and overall revenue receipt," he said.