A move is underway to downsize the national budget for the current fiscal year (FY21) by 5.28 percent to Tk 5.38 trillion from the original size of 5.68 trillion due mainly to a hefty shortfall in revenue collection amid Covid-19 pandemic.
The Economic Co-ordination Council of the Finance Ministry in a recent meeting made the revision to the national budget for fiscal year 2020-21.
The council has fixed at Tk 3.40 trillion for operational expenditure while Tk 1.97 trillion for development spending, according to the ministry of finance.
The target for overall revenue collection has been lowered to Tk 3.49 trillion from Tk 3.78 trillion fixed in the original budget for FY21.
The meeting has fixed the tax collection target for National Board of Revenue (NBR) at Tk 3.01 trillion, 8.78 per cent less than the original Tk 3.30 trillion. The finance division has already sent the revised revenue collection target to the NBR's income tax, customs and VAT wings.
Of the revised revenue budget, the target for Value Added Tax (VAT) department has been set at Tk 1.10 trillion, income tax at Tk 970 billion and for customs at Tk 940 billion.
The original targets for these three wings were Tk 1.28 trillion for VAT, Tk 1.05 trillion for income tax and Tk 956.52 billion for customs.
Director General of the Research and Statistics wing of the NBR Md Anwar Hossain said the revised revenue target is achievable as the collection has been picking up momentum with the economic recovery.
Executive Director of the Policy Research Institute of Bangladesh (PRI) Dr Ahsan H Mansur said the government may collect a maximum of Tk 2.40 trillion tax this year recording a 10 percent growth.
"It's the natural tax revenue collection growth for the country. The pandemic may hit it by 1.0 to 2.0 per cent," he said.
Dr Mansur proposed framing a realistic target for tax revenue collection on the basis of ground reality, which would be achievable.
There might be a Tk 610 billion shortfall in tax revenue collection this year against the revised target, he added.
He, however, suggested the government refrain from cutting the development expenditures to stimulate the domestic demand.
"This is not the year of austerity, despite poor revenue mobilisation," he added.
Until January of the current fiscal, the NBR collected tax revenue worth Tk 1.32 trillion with a 4.55 per cent growth over the corresponding period of the last year.
The NBR will have to mobilise Tk 1.69 trillion tax revenue more in February-June period to achieve the revised target for the entire fiscal.
The original target for NBR was set expecting around 50 per cent growth over the actual collection last year. In the first seven months, the NBR faced a Tk 368.41 billion shortfall against the original target.
Officials said the NBR is still lagging behind in its average revenue collection growth of 10.20 per cent in the last five years.
An analysis found the revenue collection growth rose gradually to end up in the positive trajectory in the last fiscal (FY20).
Until December 2020, the tax collection growth was 2.10 per cent, which more than doubled in July-January period.
In July-January period, the VAT collection at the local stages showed a dismal 2.26 per cent growth, followed by income tax and travel tax 5.06 per cent and the customs wing 7.10 per cent. Until January, import tax collection faced a Tk 150.88 billion shortfall against its target. However, the customs wing achieved a moderate 7.10 per cent growth in this period.
The income tax collection also grew by 5.06 per cent in July-January period, although the shortfall against its target hovered at Tk 80.95 billion.
During the same period last year, the NBR achieved a 7.74 per cent growth, of which VAT grew 10.24 per cent, income tax 11.55 per cent and customs 1.02 per cent.
In January, the NBR's revenue collection posted a 6.41 per cent growth year-on-year.
Officials said the budget was cut substantially this fiscal compared with the previous years, following the COVID-19 impact on the economy.
