According to the IMF's $4.7 billion loan package condition, the Bangladeshi government must increase revenue collection for the state coffers by a specified percentage for FY24, FY25, and FY26 based on the current FY23 revenue collection.
Yet, figures for the first seven months of the current fiscal year show that the National Board of Revenue (NBR) resource mobilization growth has already slowed compared to the same period the previous fiscal year.
Based on an analysis of the NBR's most recent preliminary data, the two most pressing issues are income tax and import and export taxes.
This shows the erosion of income for both individuals and corporations, as well as the subsequent increase in imports.
According to the latest NBR data, income tax growth was 6.49% from July to January of FY23, followed by import and export taxes at 7.74%.
Whereas with 15% rise, VAT followed a reasonable increase and overall tax income collection increased by 18.56% in FY22.
Until December 2022, tax revenue collection increased by 11%.
Tk172,000 crore has been deposited in the state coffers until January, trailing behind the target of Tk189,000 crore set for the period by Tk17,266 crore.
For the last seven months, NBR collected Tk66,602 crore in VAT, Tk53,261 crore in income and travel tax, and Tk52,445 crore in import and export taxes.
Data analysis also reveals that import and export duty collection fell short of the target by Tk11,975 crore, the largest shortfall among the three wings, followed by income tax collection of Tk2,758 crore and VAT collection of Tk2,531 crore.
Last year, the NBR increased income tax collection by 22.23% between July and January.
According to NBR data, 2.8 million taxpayers out of 8.4 million TIN holders filed tax returns in fiscal year 2022-23.
IMF conditions and challenges
The International Monetary Fund (IMF) set a target of increasing Bangladesh's tax GDP ratio from 7.8% to 8.3% by the end of FY24 and to 9.5% by the end of FY26.
To meet IMF's condition for the $4.7 billion loan package, the Bangladeshi government needs to raise the revenue by at least an additional Tk65,000 crore by the end of FY24.
As per multilateral lender organization conditions, if the revenue can be mobilized in proportion to GDP after FY26, at least Tk234,000 crore more will be added than the revenue that will be accumulated in the state coffer at the end of FY23.
At the end of FY25, the amount of this additional revenue collection has to generate Tk138,300 crore more than FY23, according to a calculation by Policy Research Institute (PRI) Bangladesh.
To achieve this target and fulfill IMFs conditions, economists are saying that major structural reforms are needed as early as possible.
Economists weigh in
Ahsan H Mansur, executive director of Policy Research Institute (PRI) said: “There is no chance of any change in the situation, unless the government pays attention to reforming the tax department. To meet IMF conditions, major structural reforms are needed as early as possible. But this reform is not just because the IMF says so. This reform is necessary for us. So we would like to implement it as our homegrown agenda.”
Answering a question regarding the main challenges, this former IMF official said that corruption and inefficiency are the main reasons for the tax-GDP ratio remaining at an unsatisfactory level.
Mohammad Abdur Razzaque, chairman of the Research and Policy Integration for Development (Rapid) and research director of the Policy Research Institute (PRI) said earlier that IMF's loan condition on domestic revenue mobilization should be considered as part of a home-grown agenda and the tax-GDP ratio needs to go much higher than what has been suggested.