How Covid has caused a dent in Bangladesh's coffers
Publish- December 25, 2020, 11:26 AM
Fahad Ferdous - UNB Staff Writer
Update- December 25, 2020, 11:35 AM
The Covid-19 pandemic and consequent lockdown have caused a major dent in the coffers of the Bangladesh government, with the National Board of Revenue (NBR) witnessing a negative growth of 4% in revenue collections in the last fiscal.
Officials have attributed this negative growth in 2019-20 to lower tax collections stemming from complete shutdown of manufacturing and service sectors as well as a massive drop in discretionary spending post-lockdown.
Indirect Tax Collections
According to data, the revenue board collected Tk 2,15,400 crore till June 30 against the revised target of Tk 3,00,500 crore. The original target was fixed at Tk3,25,600 crore for the fiscal. The standard tax year in Bangladesh is July 1 to June 30.
In the previous financial year, that is 2018-19, the collection was Tk 2,23,892. In fact, the revenue collection grew by 13-14% on an average in the past decade, and the growth was 11% in 2018-19, as per NBR statistics in possession with UNB.
Officials said the negative growth in revenue collection was not unexpected at all given the ground reality as economic activities, including production, consumption, import and export, came to a standstill for nearly three months since the end of March, following the general holidays and movement restrictions enforced to contain the spread of coronavirus.
Direct Tax Collections
Although the total revenue collection saw a negative growth, the direct tax -- income tax -- collections saw a marginal growth of 0.41%. On the other hand, value added tax (VAT) and customs duty collections fell by 6.86% and 4.39%, respectively, in the last fiscal.
According to data, VAT collection stood at Tk 81,600 crore followed by income tax at Tk 73,200 crore and customs duty Tk 60,600 crore in 2019-20. In the previous fiscal, VAT collection was Tk 87,610 crore, income tax collection Tk 72,900 crore and customs duty Tk 63,382 crore.
Due to the pandemic, NBR was also forced to cancel its regular Income Tax Fair to provide a hassle-free submission of returns. Though the Board had arranged income tax fair-like systems in its respective zones, the turnout was not satisfactory at all. The Board was compelled to extend the submission deadline by one month from the existing November 30.
At the same time, NBR has been able to introduce the long-awaited electronic fiscal devices (EFDs) to check VAT evasion in businesses.
In the first phase, the Board installed EFDs in Dhaka and Chattogram. The devices are connected with the NBR server and the transactions would be captured on a real-time basis.
Some 24 categories of products and services having an annual turnover of more than Tk 50 lakh will come under the EFD coverage.
However, the amnesty scheme to enable people with black money to come clean by paying tax and penalty failed to get the desired response. Only Tk 400 crore of income was declared in the scheme till November 30, according to NBR.
Earlier black money-holders had been able to legalise their cash by investing in residential buildings through payment of 10% tax on the amount invested, which for regular taxpayers is between 10 and 30%. From the last fiscal, they were also allowed to invest in economic zones and hi-tech parks.
In the current fiscal, individual taxpayers will be allowed to disclose any type of undisclosed house properties, including land, building and apartment by paying tax at a particular rate on per square metre.
Individual taxpayers will also be able to make any disclosure of undisclosed cash, bank deposits, savings certificates, shares, bonds or any other securities by paying taxes at a rate of 10%. They can also invest in the capital market and show it in their tax returns, but they will have to maintain a one-year lock-in period.
According to a senior NBR official, the reason for the poor response of this scheme till now has been the lack of trust on NBR by black money holders.
This year, NBR has suffered another setback regarding the online submission of income tax returns. The Finance Minister announced in the budget that the new taxpayers who submit their return online will get Tk 2000 rebate, but the system failed to kick off in a proper way.