Dhaka, Bangladesh
NBR plans to offset revenue deficit after VAT setback

NBR plans to offset revenue deficit after VAT setback

The National Board of Revenue has drawn up a plan to meet the Tk 200 billion deficit after the government dropped the decision to implement uniform VAT from this fiscal year. The board, however, informed the parliamentary standing committee on the finance ministry at a meeting last week that the government would still be in deficit of more than Tk 50 billion after executing the plan. The parliament has passed the Tk 4.26 trillion budget for this fiscal year, with a revenue target of Tk 2.88 trillion. From value-added tax, the government had planned to earn more than Tk 910 billion, a fourth of the total target. After deferring the implementation of the VAT law, it will face a shortfall of Tk 200 billion. Prime Minister Sheikh Hasina said in her closing speech in the parliament on the budget that the deficit in revenue will have to be taken care of at any rate. In a report submitted to the parliamentary committee, the NBR said it would be possible to collect Tk 56 billion through the measures taken in the revenue budget. The estimated figures include Tk 50 billion from cigarettes and bidis, Tk 5 billion from excise duty on bank accounts and plane fares, and Tk 1 billion from supplementary tax on fast food. The NBR also sees possibilities of collecting another Tk 20 billion from due taxes and increase in tax compliance, and Tk 93.8 billion more from expanded businesses and natural growth of financial activities. Finally, the revenue deficit will stand at Tk 52 billion, according to the NBR report. “In order to meet this deficit, necessary measures have been initiated for settling the big cases through the VAT commissionerates under the NBR and unhindered collection of dues,” the report says. The board also drew the finance ministry’s attention to Tk 20 billion dues from Bangladesh Petroleum Corporation and around Tk 220 billion from Petrobangla. After the meeting, standing committee member Sawkat Chowdhure told bdnews24.com: “The committee has asked the NBR to meet the deficit by implementing the plan. “It also recommended expansion of VAT areas and collection of dues,” he said. Earlier, Finance Minister AMA Muhith said it would be tough for the government to meet the revenue target set in the national budget for FY2018 without the new VAT law now suspended for two years. “I shall not speak about it now. I am having various meetings ... will see what to do,” Muhith said responding to questions from reporters after a meeting at the secretariat recently. The government estimated Tk 200 billion in additional income under the new VAT law. Now that amount “won’t come, there will be less”, Muhith said. “How to meet (the revenue target) is a very critical problem.” Muhith rolled out a Tk 4.26 trillion budget for fiscal 2017-18 with an initial plan for a 15 percent uniform VAT rate. While it had a revenue target of Tk 2.88 trillion, the minister initially aimed to earn over Tk 910 billion from value-added tax or VAT. But the proposal triggered widespread criticisms that later led Prime Minster Sheikh Hasina to suspend the law for two more years, keeping the existing multiple rates of VAT. That came as a big shock to Muhith’s plan to implement the budget. Economists said it would force the government to widen the tax net to meet the revenue deficit and pile pressure on the National Board of Revenue. Responding to a query, the finance minister on Wednesday said it might not be necessary to table a new plan in parliament following the new law’s suspension. A meeting on these issues will be held on Thursday, he said. Muhith also clarified that the 1991 VAT law was not in effect at present. “The 2012 law is in effect following amendments. We bring amendments to it every year.” He, however, added that the online VAT project kicked off despite the delay of the implementation of the new law. Meanwhile, Prime Minister Sheikh Hasina has proposed to recover by any means the Tk 200 billion additional revenue income that the government says will now be lost due to the suspension of the new VAT law. She has also urged the people to pay taxes regularly to offset the budget deficit and for further development. She made the calls during her valedictory speech of the budget session of the 10th Parliament in the backdrop of Opposition Leader Raushon Ershad’s statements made earlier. Last month, Finance Minister AMA Muhith had rolled out a Tk 4.26 trillion budget for fiscal 2017-18 with an initial plan for a 15 percent uniform VAT rate under the new law. While it had a revenue target of Tk 2.88 trillion, the minister initially aimed to earn over Tk 910 billion from value-added tax or VAT. The government had also estimated Tk 200 billion in additional income under the new VAT law. But the proposal had triggered widespread criticisms that later prompted Hasina to suspend the law for two more years, keeping the existing multiple rates of VAT. This will dent the plan to implement the new budget, which Raushon mentioned on Thursday. Hasina said, “The opposition leader has said that revenue earning will take a hit. The damage is already done. The budget was made considering the VAT law and based on the possible income from mobile phone. “Due to the suspension of the VAT law, Tk 200 million in revenue will not be collected and we’ll have offset the deficit in any way possible.” Economists say the government will be forced to widen the tax net to meet the revenue shortfall and it will put more pressure on the National Board of Revenue. Hasina said to balance the deficit in what she called ‘the biggest budget in the country’s history’, the government will have to take bank loan or cut the development budget. “We’ll see how we can adjust.” She hoped that the government would be able to implement the Tk 1.53 trillion Annual Development Programme for FY2017. The prime minister also said it is now a proven fact that there is freedom of speech because the ruling MPs have been able to criticise the budget, the finance minister and the government. “Their criticisms led the finance minister to bring changes to the budget,” she pointed out.

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