The government of Bangladesh has set ambitious revenue collection targets for FY25 and FY26, aiming to gather Tk587,200 crore and Tk709,700 crore, respectively.
The strategy hinges on enhancing digitalization and simplifying tax procedures for both businesses and individuals.
The focus will be on direct taxes and VAT to raise more revenue.
In addition to expanding the tax net and increasing the capacity of tax officials, exercises will be carried out to rationalize the current culture of widespread tax exemptions and to bring in heightened transparency in the budgetary discourse.
As per the Medium Term Macroeconomic Policy Statement (2023-24 to 2025-26) of the Finance Division of Finance Ministry, some Tk534,300 crore will come from the tax revenue sector in FY25 fiscal and Tk646,300 crore in FY26.
In the next two fiscal years, the National Board of Revenue (NBR) will provide Tk509,500 crore and Tk617,100 crore.
From the Income Tax wing, the projected collection will be Tk175,300 crore for the next fiscal, and Tk212,300 crore for FY26.
Collection from the import duties will be Tk151,100 crore and Tk183,000 crore respectively.
From VAT and Supplementary Duties, the revenue collection will be Tk183,100 crore and Tk221,800 crore respectively.
The non-NBR tax for FY25 and FY26 will be Tk24,800 crore and Tk29,200 crore respectively.
Non-tax revenue collection will be Tk52,900 crore and Tk63,400 crore respectively.
The target for the running FY24 fiscal is Tk500,000 crore with Tk450,000 crore from tax revenue.
Of the total amount, Tk430,000 crore will come from NBR through Tk148,000 crore from income tax, Tk127,500 crore from import duties, Tk154,500 crore from VAT and Supplementary duties.
Some Tk20,000 crore will be collected from the non-NBR sector while Tk50,000 crore from non-tax revenue sector.
According to the Medium Term Macroeconomic Policy Statement, revenue outturns estimated for FY24 and projection for the next two years show high elasticity and buoyancy, implying robustness in revenue mobilization in the medium term.
It mentions that among the tax and non-tax parts of the revenue, the tax revenue is forecasted to be more buoyant and elastic than the non-tax part.
The elasticity data shows that the overall revenue is projected to grow 1.65 times higher than the nominal GDP in FY26.
As per the statement, the revenue elasticity of GDP for FY24 fiscal is 1.28 times higher than the last fiscal while it is projected to be 1.40 times higher in the next FY25.
The tax revenue elasticity of GDP will be 1.33 times higher in the current fiscal while it will be 1.50 times higher in the next fiscal and 1.66 times higher in FY26.
The non-tax revenue elasticity of GDP for the running fiscal will be 0.92 times higher in the current fiscal, 0.47 times higher in the next fiscal, and 1.57 times higher in FY26.
On the other hand, the buoyancy indicates that, in FY26 the tax revenue in real terms may grow 98% higher than the growth of real GDP.
The Policy Statement mentions that the revenue mobilization acts as a catalyst to achieve the development outcomes of a country.
Bangladesh has envisioned its long-term development trajectory to be a higher middle-income country in 2031 and to be a developed country in 2041.
In addition to these aspirations, the ‘Perspective Plan of Bangladesh 2021-2041’ has targeted to raise the revenue- GDP ratio to 19.55% by 2031 and 24% by 2041.
A large share of the revenue comes from the direct (income tax) and indirect taxes (VAT and customs) collected by the National Board of Revenue (NBR). Non-NBR taxes and Non-Tax Revenue (NTR) consists of smaller parts.
It said that there is a need to identify the reasons for low revenue collection to move onto the essential next step to correct the course.
It is important to understand various issues such as the economic structure (large informality and exemptions), structural weaknesses (complicated processes and information asymmetry), and cultural factors (apathy towards paying taxes) that contribute to significant underperformance in revenue collection.
The government, the policy statement said, with the support of private sector operators, is keen to make paying taxes easy, tax rules easy to understand and rationalize tax exemptions.
Success in revenue collection will be strengthened by making the tax administration easy to approach, increasing digitalization to bring in transparency and predictability and bringing in progressivity in taxation where rich people pay a higher part of the taxes, it added.
