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The government has set revenue collection targets of Tk 5.87 trillion and Tk 7.09 trillion for FY25 and FY26 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 rationalise 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 Tk 5.34 trillion will come from the tax revenue sector in FY25 and Tk 6.46 trillion in FY26.
In the next two fiscal years, the National Board of Revenue (NBR) will provide Tk 5.09 trillion and Tk 6.17 trillion.
From the Income Tax wing, the projected collection will be Tk 1.75 trillion for the next fiscal, and Tk 2.12 trillion for FY26. Collections from the import duties will be Tk 1.51 trillion and Tk 1.83 trillion respectively.
From VAT and Supplementary Duties, the revenue collection will be Tk 1.83 trillion and Tk 2.21 trillion respectively.
The non-NBR tax for FY25 and FY26 will be Tk 248 billion and Tk 292 billion, respectively. Non-tax revenue collection will be Tk 529 billion and Tk 634 billion, respectively.
The target for the running FY24 is Tk 5.00 trillion with Tk 4.50 trillion from tax revenue. Of the total amount, Tk 4.30 trillion will come from NBR through Tk 1.48 trillion from income tax, Tk 1.27 trillion from import duties, Tk 1.54 trillion from VAT and supplementary duties. Some Tk 200 billion will be collected from the non-NBR sectors while Tk 500 billion from non-tax revenue sector.
According to the Medium Term Macroeconomic Policy Statement, revenue outturns estimated for FY24 and projections for the next two years show high elasticity and buoyancy, implying robustness in revenue mobilisation 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 the FY24 is 1.28 times higher than the previous fiscal while it is projected to be 1.40 times higher in 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, 0.47 times higher in the next fiscal year, 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 per cent higher than the growth of real GDP.
The Policy Statement mentions that revenue mobilisation 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 a developed country in 2041.
In addition to these aspirations, the 'Perspective Plan of Bangladesh 2021-2041' has targeted raising the revenue-to-GDP ratio to 19.55 per cent by 2031 and to reach 24 per cent by 2041.
The statement says that the spectacular growth Bangladesh registered in the last decades, however, has not been underpinned by concomitant revenue growth. A large share of the revenue comes from 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) consist 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 rationalise 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.