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Revenue needs to increase by three folds to meet IMF conditions

Economic Tag: Vat & Tax

The International Monetary Fund (IMF) loan package stipulates that Bangladesh’s tax-to-GDP ratio must reach 9.5 percent; according to the Policy Research Institute (PRI), this can only be achieved by increasing revenue collection by Tk2.34 trillion over the course of the following three fiscal years. To meet the IMF recommendations, the NBR must generate an additional Tk 650 billion in revenue in fiscal year 2023–2024. In order to qualify for a $4.7 billion loan package, Bangladesh must expand its GDP by 0.5% annually in fiscal years 24 and 25 and 0.7% annually in fiscal year 26.

According to a PRI analysis, raising the tax-to-GDP ratio by 5 percentage points (i.e., in order to reach the 8th FYP target) may boost economic growth by up to 3.3 percentage points and lower the poverty headcount rate by up to 2.2 percentage points. The PRI suggests lowering tax exemptions, raising personal income tax compliance, enacting quick-fix VAT reforms, and raising business compliance, among other things. Increasing the number of persons registered and implementing policies to improve payback are other suggestions made by PRI. For example, the government should make it mandatory to provide a tax return in order to access services.

 

 

Source for more details:   

Financial Express

Dhaka Tribune

 

 

Source for more details:

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Emphasis on wealth tax, financial sector reforms in FY’24 budget

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In order to ensure macroeconomic stability, economists advise the government to include fresh measures in the national budget for the upcoming fiscal 2023–2024 while continuing the Covid stimulus package.

A wealth tax was suggested by economists as a way to lessen inequality, along with significant government involvement in healthcare and education. A finance or bank commission was also suggested as a way to maintain financial sector stability.
The experts also recommended tax system changes to raise the tax-to-GDP ratio, which is now at 8% and is the lowest among South Asian nations. The recommendations also called for the removal of regulatory duties on imports and the implementation of a pricing policy for consumer goods.

Economic experts also suggested large-scale efforts to ensure the quality of public healthcare and education establishing a finance or bank commission to ensure financial sector stability changes to the tax code that would raise the tax-to-GDP ratio introduction of a consumer goods pricing policy removal of regulatory import taxes.

Revenue collection falls short of the target in Jul-Feb

March 20, 2023

The bank lending cap is being abolished as Bangladesh Bank finally resolves to reverse the crisis-era measure and grant bankers their long-desired rise in profitability. Bankers lamented the fact that are operating under two set interest brackets—rates on loans given by banks and on deposits, they accept from customers—inflationary pressure on their revenues was eroding their profit margins.

The central bank will establish a market-based reference rate under the interest rate-corridor method for the banks to fix the loan rate based on the benchmark rate in place of the lending rate cap of 9.0 percent, which was imposed in April 2020, the BB sources said. The NBR fell behind in the first eight months of the current fiscal year in income and travel taxes by a total of Tk 3,425 crore, followed by Tk 5,738 crore in local VAT and Tk 13,814 crore in import revenue, per the data. The revenue board received Tk 76,401 crore from local VAT during that time, Tk 60,437 crore from income and travel taxes, and Tk 59,198 crore from import duties.

Industries demand corporate tax cut

March 13, 2023

Telecommunications businesses suggested that the National Board of Revenue should lower the corporation tax rate in the national budget for the upcoming fiscal year 2023–2024 in order to assure ease of doing business. The similar demand was made by the beverage and tobacco manufacturing industries. According to them the corporate tax in Bangladesh was higher than that in the other countries.

At a pre-budget meeting with the NBR at its office in Sher-e-Bangla Nagar in the capital Dhaka, the Association of Mobile Telecom Operators of Bangladesh, British American Tobacco Bangladesh, Bangladesh Bidi Shilpa Malik Samity, and the Bangladesh Beverage Manufacturers Association each presented their respective budget proposals.

The AMTOB presented 16 proposals related to income tax, value-added tax, import duty and supplementary duty. It demanded withdrawing or reducing the minimum advance tax rate on sales of services and withdrawing the minimum turnover tax for the mobile operators. In accordance with the Income Tax Ordinance of 1984, the association also suggested exempting mobile services from tax deduction at source, just as other digital services including banking, insurance, and mobile financial services

 

Source for more insights:

The New Age

Budget deficit worsens as revenue declines

March 11, 2023

Finance officials reported that the government’s budget deficit increased in the first half of the current fiscal year due to declining income receipts, and economists do not see any improvement in the near future. According to official statistics, the budget deficit up to December was Tk 101.66 billion despite decreasing income collection. Up until November, the deficit was Tk 71.53 billion.

 

Up to December, the entire amount of revenue that was mobilized was Tk 1.613 trillion, which is less than Tk 50 billion than it was during the same time last year. During the time under review, there were 1.715 trillion Tk in total expenses. Tax collection was reported in the official accounting at roughly Tk 1.449 trillion, a 3.3% decrease from the previous year. Nonetheless, non-tax revenue (NTR), which was Tk 163.87 billion from July to December, remained nearly constant.

 

The non-development spending, on the other hand, climbed to Tk 1.262 trillion throughout the course of the year. The cost of the annual development program, or ADP, was reduced to Tk 352.61 billion. A year prior, it was Tk 370.73 billion.

 

Source for more details:

Financial Express

DCCI urges to cut corp tax by 2.5% for non-listed firms

March 7, 2023

The Dhaka Chamber of Commerce and Industry (DCCI) has proposed the National Board of Revenue (NBR) to decrease corporate tax by 2.5 percent for non-listed companies in the upcoming fiscal year in order to foster an investment-friendly environment.

It also proposed raising the tax-free income limit for people to Tk. 5 Lakh (from Tk. 3 Lakh now) in response to high inflation and rising living costs. Nowadays, only 3 million TIN holders pay their taxes, which results in a very low tax-to-GDP ratio.

The industry leader recommended increasing the VAT-free yearly turnover limit for cottage and small companies from Tk 3 crore to Tk 4 crore. Banks charge a 10-15% fee on deposits; adding an excise duty to deposits and savings will discourage depositors. It should also be lowered. Dairy farmers and restaurant owners also proposed lowering their VAT and taxes on their products.

 

Source for more details:

The Business Post

The Daily Observer

Daily Sun

 

Tax receipts fell 17,170 crore short of the goal

February 22, 2023

The National Board of Revenue (NBR) missed the goal set for the July-January period of the current financial year 2022–2023 by 9.05 percent, or Tk 17,170 crore according to NBR preliminary data. Yet, when compared to the same period in the prior fiscal year 2021–2022, revenue collection increased by 12%.

The revenue board’s income tax division brought in Tk 55,160 crore, the VAT division brought in Tk 61,296 crore vs the target of Tk 69,134 crore, and the customs division brought in Tk 55,948 crore. Over the previous five years, the growth in revenue collection was 12.12% on average. The total amount of income collected in January fell 2.30 percent from the previous year to Tk 24,909 crore.

 

 

 

Source for more details:

New Age BD

 

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