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Dhaka Tribune

FY14 tax target set at 14.2% of GDP

Update : 30 Apr 2013, 03:35 AM

Finance Division has set a target to increase the tax-GDP ratio by 0.8 percentage point to 14.2% in the next fiscal year despite having the challenges of political unrest and apparel factory collapse at Savar.

“It’s a new estimate by finance division, but is unlikely to be achieved with having the ongoing political unrest coupled with the possible impact the Savar incident,” National Board of Revenue (NBR) Chairman Md Golam Hossain told the Dhaka Tribune.

He explained that the reactions from the international market to the factory collapse might have an impact on the revenue collection in the days ahead.

Finance Minister AMA Muhith has asked the revenue officials to raise the tax target to 14.2% of GDP (Gross Domestic Product) for 2013-14 from 13.4% of the outgoing fiscal year and 10.2% in 2011-12.

At a pre-budget meeting with the ruling party lawmaker’s Sunday, he pointed finger at the revenue growth in last three fiscal years to argue in favour of the tax target.

The ongoing political unrest and frequent shutdowns (hartals) have already started taking toll on the revenue collection as NBR apprised the Finance Division of the adverse impact. It leads to an aggregate shortfall in the tax collection by Tk43bn in the first three quarters of the current fiscal, it said.

It has in fact posed a threat to achieve Tk1.12tn target of the outgoing fiscal year, said the NBR.

The resources committee of the government has set a revenue target of Tk1.36tn for the next fiscal year.

“The tax-GDP projection is quite ambitious for the next fiscal year because of political unrest and the deadly incident in Savar,” Dr Zaid Bakht, research director at Bangladesh Institute of Development Studies (BIDS), told the Dhaka Tribune.

He pointed out that the country’s macroeconomic situation is now under tremendous pressure due to external shocks.    

Abdul Bayes, professor of economics at Jahangirnagar University, said the introduction of value added tax has boosted the revenue performance over time, but the lack of modernisation of tax administration is still an acute problem in generating sufficient resources.

He said a fast turnaround is urgently needed to raise tax-GDP ratio to roughly 15% by 2014-15. The objective of reaching the target is to reduce dependency on the trade taxes – it would require fundamental changes in tax laws and modernisation of tax administration.



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