International Monetary Fund (IMF) has granted Bangladesh the second tranche of $689 million of $4.7 billion loan. Before the approval of the tranche, the IMF had reviewed the performance of the country and inquired about meeting the benchmarks. Bangladesh fell short of meeting two benchmarks: one was the Foreign reserve of $23.74 billion, and another was the floor on tax revenue of $3.46 billion. As Bangladesh was able to meet the other targets, a second tranche was issued. However, in the target for the next installment, IMF has asked Bangladesh to collect additional revenue of BDT 66,900 crore. How the country with the lowest tax-GDP ratio in the region can collect such a big amount is a difficult task for the responsible organization, NBR.
The National Board of Revenue (NBR) grapples with inconsistent tax policies and procedures, hindering its ability to meet IMF targets. With the current tax infrastructure, it will be difficult to achieve the new IMF target of additional tax revenue of BDT 66,900 crore by June, 2024. However, I believe this new target will help NBR push its boundaries, come out of its tradition of only reforming policies, and focus more on the effective implementation strategies too.
To achieve this, NBR should conduct comprehensive research, and engage stakeholders like the central bank, business representatives, and securities commission. By June’24, a stable tax framework, devoid of frequent changes, must be established through data-driven discussions. The paramount amount of unpaid taxes deserves more attention. For example, three private telecom operators have been ordered by The Appellate Division of the Supreme Court (SC) to pay Tk. 2,550 crore as outstanding value-added tax (VAT). The NBR has disclosed that around Tk 25,000 crore of value-added tax (VAT) alone is yet to be recovered, with nearly Tk 24,000 crore owed by government entities. Notably, another Tk 21,600 crore is tied up in nearly 10,000 pending cases. Considering this just as the tip of the iceberg, NBR should accelerate the collection of unpaid taxes from the institutional taxpayers.
For both institutional and individual taxpayers, streamlining tax return submissions is crucial. NBR should simplify the process and conduct training sessions for taxpayers. Recognizing the impracticality of training the entire population, targeted programs for major income sources, such as corporations, can be effective. This pragmatic approach not only eases the burden on tax officers but also ensures widespread compliance.
Moreover, embracing 24/7 accessibility for government websites, especially those related to tax submissions, would enhance convenience for citizens. Addressing the inadequacies of helpline services is imperative for fostering taxpayer trust and engagement.
Transparency in fund utilization is paramount. NBR must demonstrate how tax contributions directly contribute to national development. Recent incidents of government organizations overspending on non-essential celebrations highlight the need for a collective understanding of fiscal responsibility and patriotism, emphasizing savings over extravagant displays. Ultimately, instilling pride in taxpayers requires a concerted effort toward fiscal responsibility, transparency, and accountability.
Not just NBR, But Government entities, including banks and industries, must transparently contribute to revenue without compromising public welfare. Striking this balance, amidst IMF conditions, is challenging but vital for economic restructuring. A nuanced approach, recognizing government organizations’ dual role in serving the public interest and enhancing revenue, is crucial for sustainable development.