The International Monetary Fund (IMF) has advised the National Board of Revenue (NBR) not to cut the existing corporate-tax rates further in the budget in order to keep revenue mobilization uninterrupted.
In a meeting with the National Board of Revenue (NBR) on Wednesday, a visiting delegation of the IMF also discouraged offering new tax exemptions in the budget for the upcoming FY24 to reduce tax expenditure that is eating up around 2.28% of GDP, sources said.
The IMF team held two separate meetings with senior officials of the customs-VAT and income-tax wings on the NBR premises on Wednesday, for a review of the actions being taken on its loan conditions.
Official sources said the IMF mission laid focus on the fiscal measures the NBR has planned to set out in the budget for FY24 to increase the tax-GDP ratio by 0.5% by June 24.
The sources said the tax authority apprised the IMF visiting mission of its status until March 2023 regarding implementation of the dos binding its US$4.7 billion worth of loan approved recently, consequent on government drive to beef up the country's foreign-exchange reserves.
Officials said they provided a broad-based idea on how the revenue authority would bring down the trade-related taxes gradually and shift dependence onto revenue collection on Value-Added Tax (VAT) and Income Tax.
However, the NBR could not provide any”'quantifiable” data considering secrecy of the fiscal measures that usually come through the Finance Act ratifying every year's national budget.
Sources said the IMF team laid emphasis on framing mid-term revenue strategies (MTRS) within the shortest possible time so that the government could reduce its dependence on trade taxes.
Major conditions from the IMF on fiscal issues include adopting tax measures to increase the country's tax- GDP ratio by 0.5% in FY24 budget, rationalization of tax expenditures, implementation of new income tax and customs act, increase in the number of taxpayers, and installing electronic fiscal devices.
Reducing bad loans
Non-performing loans (NPLs) trigger serious risks to the banking system, the International Monetary Fund cautioned and suggested that Bangladesh should further tighten measures against the buildup of bad loans.
The burning issue of non-performing loan or NPL was largely discussed in the IMF team's meeting with officials concerned of Bangladesh Bank (BB) and the banking and financial institutions division, the meeting sources said.
According to the IMF assessment, the volume of bad loans will increase to Tk30,000 crore if the rescheduled credits count as NPL.
The IMF officials in the meeting said the departments concerned cannot control NPL.
In response, the secretary of the financial institutions division Sheikh Mohammad Salim Ullah said the IMF has given a higher target to this effect and it becomes tough to meet the target if it is much higher, according to the meeting sources.
At the same time, the officials of the Bretton Woods institution also expressed their concern over the volume of suspicious transactions and capital flight.
They suggested giving more attention to ensuring governance in the banking system.
The IMF team also wanted to know the overall volume of troubled credits in the banks and financial institutions and the steps of the central bank in terms of controlling inflation.