Thinking The Unthinkable

NBR misses the revenue target, Taxing export maybe the solution perfect.

Latest NBR revenue collection data shows the collection for July falls short of the stated target by Tk 28.62 billion. VAT outshines others,but income tax and customs duty did not perform as anticipated. The shortfall came amid rising food inflation while international commodity market showing a downward trend.

It is hard to ascertain what caused the price of rice to rise amid record production. If there were [a producer] price index ,then we could see where the problem lies. I have argued about this here(See "Resume The Routine Work", published here on October 9,2024). Unfortunately, it is not available and neither govt nor the BBS shows any intention to launch it pretty soon.

Governor himself acknowledged that $35 billion was plundered from the banking system in the last 15 years. Unlike the USA, Bangladesh does not allow any bank to collapse. So an initiative is on to merge six trouble-ridden banks. Literally, govt is taking the bad managerial decision of the troubled banks upon its shoulder. Letting them go bankrupt would be more prudent solution: you made a wrong decision and you bear the consequences. Govt does not bail out petty businesses, why should it bail out politically motivated projects?

NBR is desperate to make new directives. One directive seeks bank account details of TIN holders. Tax deduction on bank deposits, balance at the end of June and interest earned are the information to be investigated in real time for online tax return. The new directive will discard the need for such proof as the whole thing will happen in real time. Instead of going after how much existing TIN holders earned, it is better to expand operation in other districts, particularly in border districts and real estate booming districts like Sylhet, Chattogram and Rajshahi. Recovering the stolen asset, as govt claimed it traced $3 billion worth of stolen asset abroad, will be another area. Next 4 months after election may see unexpected rise in revenue as new elected govt will assume office for 4 years. Many laundered assets will come back in disguise of FDI, export earnings and remittances. Late [Prof.] Nurul Islam did a remarkable research on this topic and highlighted the two way traffic of this stolen asset(see "Corruption,Its Control And Drivers Of Change: The Case Of Bangladesh",by Nurul Islam,BIDS)

If NBR is really eager to boost revenue, the most plausible way is to impose tax (at least 1%) on remittances and export as I explained in an earlier piece. Central bank's depreciation policy through forex intervention and reduction in reciprocal tariff made room for such taxation. Why not take the advantage while leaving the industry unscathed? Another area is to reimpose duty on sugar that generates ample revenue for the govt. It will bring domestic sugar on [a par] with imported sugar in terms of price. Standard & Poor's forecast says oil prices will be lower next year. So inflationary pressure will not be a concern.

Meeting the revenue target should focus on expansion of taxpayers' base, thinking the unthinkable ( taxing the remittances and export), sugar tax and stolen asset recovery. Hopefully ,post election period will bring the much needed optimism and make NBR's task much easier.

[Update: this piece is updated by me on August 21,2025; update includes link to references.]