Pressure on Revenue Collection

The government has been struggling to boost up its revenue earning. Total revenue is collected either from tax or from non-tax sources. In total revenue, tax revenue consisted of 80.9 to 83.42 percent between FY 2007-08 and FY 2012-13 and the remaining came from non-tax sources. Of the total tax revenue, nearly 95-96 percent is collected by the NBR. Several issues have gained importance in recent

times. The first concern is the prevalence of narrow tax net, which acts as a hindrance to having a stronger revenue base in the country. The second important issue is those of tax incidence, avoidance and evasion. Although the government is giving emphasis on direct tax i.e. income tax, the revenue collection of the country largely depends on the indirect taxes (e.g. VAT). Thirdly, in FY 2012-13, both NBR and non-NBR have failed to satisfy the target to collect revenue with total shortage of Tk. 40777.5 million.

Finally, in the first quarter of the current fiscal year, tax revenue from some sources has depicted a negative growth. Rate of growth of custom duty and VAT in the first quarter of current fiscal year is lower than that of the corresponding period of previous year. Even, supplementary duty (import), excise duty, and travel tax are negative in the first quarter than that of the same period in the previous year.

Income tax has been determined on five slabs progressively with income level. But when the collection of VAT is considered with direct tax, the higher burden of tax on marginalised group seems apparent. Moreover, certain types of taxes such as the inheritance tax are absent in Bangladesh which could be supportive to enhance the tax base.

Legal taxpayer pays 25 percent in the first year, whereas unrecorded money could be regularised by paying 10 percent in the next year, even enjoying benefits up to 15 percent. This type of privileged treatment reduces the incentive of paying tax and encourages evasion and avoidance.