Revised Budget for FY25: Plans Underway for an Ambitious Revenue Target

Revised Revenue Collection Target for FY25: Key Highlights

• New Target Set: The revenue collection target for FY 2024-25 is expected to be Tk 5,18,000 crore, aligning with the minimum tax revenue collection requirement set by the International Monetary Fund (IMF) under its $4.7 billion loan program.
• Comparison with Original Target: The original revenue target for the fiscal year was Tk 5,41,000 crore.
• Required Growth Rate: Achieving the revised target necessitates a 26% increase from the previous fiscal year's collection, whereas revenue growth in the first four months stood at just 3.68%.
• NBR’s Responsibility: The National Board of Revenue (NBR) has been assigned to collect Tk 4,63,500 crore, requiring an almost 28% increase despite a 0.98% decline in collection during the first six months.
• Development Partners’ Conditions: The World Bank, IMF, and Asian Development Bank have emphasized increasing Bangladesh's tax-to-GDP ratio by 0.5% in this fiscal year as a condition for budgetary support.
• Government Measures to Boost Revenue:
  • Mandatory online submission of income tax returns for government officials and select taxpayers.
  • Implementation of a-chalan and mandatory e-payment for VAT deposits exceeding Tk 10 lakh.
  • Reduction of tax exemptions and imposition of 15% VAT on various goods and services.
  • Introduction of an online platform for electronic tax deduction at source.
• Challenges to Revenue Collection:
  • High inflation, contractionary monetary policy, and austerity measures in the financial sector.
  • Slow implementation of the Annual Development Programme (ADP).
  • The NBR has requested a further reduction in the revised revenue target due to these challenges.
• Expert Insights:
  • Economic Growth & Revenue Collection: Revenue collection depends on economic expansion, business growth, and import trends.
  • Automation & Enforcement Gaps: Poor automation in revenue collection and lack of legal amendments hinder tax enforcement.
  • Reform Proposals:
    • Separation of VAT policy and administration for efficiency.
    • Reduction of tax exemptions and stricter enforcement of tax compliance.
    • Introduction of an additional personal income tax bracket for high-income earners.
    • Higher tax rates on tobacco and select products.
• IMF’s Reform Expectations for FY25 Budget:
  • Reducing corporate income tax exemptions and depletion allowances.
  • Raising VAT rates on several products to the full 15% statutory rate.
  • Implementation of structural tax reforms to enhance revenue generation.

Conclusion:

The government anticipates an increase in revenue collection in the coming months due to these measures. However, concerns remain over economic constraints, implementation challenges, and the need for comprehensive tax reforms to meet the ambitious targets.