Gov’t may miss the revenue target:Unnayan Onneshan

DHAKA, Nov. 23 (The Unnayan Onneshan Press Release) — The Unnayan Onneshan, an independent multidisciplinary think-tank, in its current issue of the Bangladesh Economic Update observes that the government may miss the revenue target in the current fiscal year, constraining the economic growth of the country.

The research organisation projects that at the current rate of revenue realisation, the gap between targeted and actualised revenue may increase by TK 8.18 billion. The target in the current budget is TK 1674.59 billion.

If the business as usual continues, the Unnayan Onneshan estimates that the budget deficits may increase by TK 558.5 billion against the targeted expenditure of TK 2224.91 billion in the current budget.

In the first quarter of the current fiscal year, tax revenue from sources such as supplementary and excise duty on import has witnessed a negative growth rate of 5.66 percent and 24.03 percent respectively against first quarter of the previous year (FY 2012-13). Besides, a lower growth rate has been observed in custom duty and value added tax (VAT) than those achieved in the last fiscal year. Growth rates of custom duty and VAT are 4.52 and 16.63 in first quarter of FY 2013-14 which were 7.69 and 19.13 in the first quarter of former fiscal year.

The Unnayan Onneshan opines that the prevalence of narrow tax base has a direct bearing on the mobilisation of revenue. The population under the income tax net is only 1.4 percent while only less than one percent actually pays the direct tax.

Referring to structural rigidities of the economy such as increase of informal sector has added to the difficulty of the government to increase the base of collection of direct tax, mentions the organisation. Between 2002-03 and 2010, the formal sector employment declined by 26.09 percent while the informal sector grew by 34.76 percent.

“The country has been unsuccessful to bring any significant change to the ratio of direct to indirect taxes, despite putting more emphasis on direct taxes in recent years,” the Unnayan Onneshan observes. The bulk of the tax has come from indirect sources, which constituted about 73 percent of total tax since FY 2006-07. Consequently, the low earning groups have been bearing the maximum burden due to expansion of the VAT, an income indifferent tax.

The research organisation points out that the lower tax collection means lower allocation for social and physical infrastructures. In the proposed budget of FY 2013-14, 19.6 percent of total allocation has been set for human development sector from 20.22 percent in FY 2012-13. Similarly, the infrastructural sector has received 2.6 percentage points lower allocation than that of FY 2012-13.

The allocation in annual development programme (ADP) for human resource, agriculture, and rural development has been reduced to 23 and 25.4 percent from 23.5 and 30.9 percent respectively of the previous year.

The policy of trade liberalisation has also been associated with the lower growth of taxes from export and import, the organization notes. As opposed to the growth rate of 2.97 percent in export-import taxes between FY 2011-12 and FY 2012-13, the local taxes have grown by 13.58 percent in the same period.

The dependence on sources other than internal revenue mobilisation for public expenditure has high cost, notes the Unnayan Onneshan. The payment of interest rate has increased from TK 203.504 billion in FY 2011-12 to TK 239.968 billion in FY 2012-13. Interest payment for domestic sources increased to TK 225.049 billion from TK 188.028 billion in 2012-13. Similarly, foreign debt has grown from USD 22.1 billion in FY 2011-12 to USD 22.77 billion in FY 2012-13.