A former National Board of Revenue chief said Thursday the Tk1.361tn revenue earning target for the board set in the budget for 2013-14 fiscal year would not be easy to meet. The target accounts for 11.4% of the Gross Domestic Product (GDP) and only Tk313.69bn less than total targeted earnings.
In an interview given to the Dhaka Tribune, Muhammad Abdul Majid termed the budget as “challenging” since it is the last year of the incumbent government, poll-year and the period would see handover of power between three governments – existing one, interim and the newly elected one.
“It is an aggressive budget, which could also be termed as a costly or ambitious budget. Since it is the terminal year for the current government, they will spend a lot in different development projects from their election manifesto which were not implemented earlier.”
He continued since expenditure is high in the budget, the government had decided to amplify the income to meet it. “Since the finance minister has said that he would not let the budget deficit go above 5%, the government had to show increased income and thus, the target for NBR is so high.”
Abdul Majid continued, “The reality would be that expenditure would be very high but the income generation will not be that much. It would be possible if it was a normal year, not a terminal or election year.”
He pointed out that the current political turmoil will ultimately take its toll on the revenue earning and “in broader sense to the overall economy.”
“It would have negative impact on Value Added Tax (VAT), income tax and customs duty collection... Import of products has decreased significantly which indicates that customs duty would fall as well.
“Businesses will not be able to run properly, and thus, it would be a challenge to collect corporate and income tax ultimately resulting in difficulties toward achieving the target.”
He continued that the upcoming budget grew 17% from the incumbent one. However, the targeted rise in revenue collection is 23-24% “which seems a bit aggressive.”
The analyst pointed out that terminal fiscals usually maintain a common course of occurrence. “Firstly, the existing government will try to spend a lot to fulfill or minimise gaps they have made in implementing their electoral manifesto. They will try to complete works that did not finish at the due time.
“They would try to spend a lot of fund in the first six months. Even though, the period would be full of natural disasters, they proposed allocating Tk30m to each MPs for development works. In the first four to five months, they would spend a large chunk of the allocations.”
The former NBR boss pointed out that the period is, however, not good for revenue earning. The earnings pick up at the end of the year, and therefore, if it does not go in favour of the budget, it poses risk of budgetary gap.”
The financial analyst, in response to a query how the target might be achieved, said, “If the three successive governments – existing, interim and new elected governments – have a determined and effective attitude, then I think the situation could be better.
“It depends on the atmosphere. If political turmoil or differences of opinions are resolved, then it could be better. But, if the situation continues, it would impact revenue earning and ultimately the economy.”
Abdul Majid pointed out if the expenditure of the government exceeds earning, there would be increased bank borrowing leading to increasing cash liquidity. “If cash liquidity begins, the private sector will not get loans or managing them would be harder resulting in a reduction of investment in the private sector, which finally, would take a toll on the economy.”
“If everything goes okay, it would not be difficult. Otherwise, it would be deviated for sure. The situation needs to be congenial and normal and everything is dependent on political commitment.”
