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Falling revenues and fiscal imperatives

          Adequate revenue mobilisation to meet both recurring and development expenditures is considered to be one of the important responsibilities of the government. With a continuous decline in external development assistance and rise in development and revenue expenditures, mopping up of sufficient domestic resources has become all the more important for a country like Bangladesh.
Tax revenue constitutes a major part of the resources that the government mobilises under a budgetary programme made for every financial year -- in case of Bangladesh, it is July-June period. The tax revenue target goes on rising every time to match the ever-increasing expenditures of the government. The National Board of Revenue (NBR) that guides and oversees the collection of all types of duty and taxes had done reasonably well during the last couple of fiscal years. During the fiscal 2003-04, the tax revenue target had been 16 per cent higher than the actual revenue collected in the previous fiscal. The Board could achieve more than 95 per cent of the target in spite of the fact many, including the donor countries and agencies, had found the revenue target to be too 'ambitious'.
However, the situation with the tax revenue mobilisation during the last eight months of the current fiscal has not been that comfortable. Rather, the government has reasons to be concerned. According to a report published in the FE Monday, the estimated shortfall in tax revenue collection during the July-February period of the current fiscal as against the target set earlier is estimated to be Tk. 40 billion--- 20 per cent less than the target. In the national budget for the current fiscal year, a 19 per cent growth in tax revenue has been envisaged. But if the ongoing trend in collection continues for the remaining months of the fiscal, the total tax revenue would hardly exceed the amount earned during the last fiscal. This means that there would be a zero growth of revenue in 2004-05.
There is no denying that such a situation is an unpalatable one for the government since the revenue expenditures during the current fiscal may even overshoot the target. That is likely to be so mainly because of the flood rehabilitation programme and implementation of the national pay scale for the government employees. More importantly, the International Monetary Fund (IMF) that had tagged the disbursement of the fourth tranche -- amounting to $ 70 million -- of its Poverty Reduction Growth Facility (PRGF) credit with the performance of the NBR, might delay the disbursement of the fund thereof. The unsatisfactory performance in revenue mobilisation has also created a difficult situation for the government, which wants to keep the fiscal deficit within a reasonable limit, between 4.0 and 4.2 per cent. However, the government with a view to coping with resource constraints, has already started its annual ritual --the downsizing of the annual development programme (ADP). It has asked the ministries and other relevant agencies to drop 'unimportant' development projects.
But why has the NBR failed to beef up revenue collection despite repeated reminders from the finance minister to improve its revenue collection performance? There are reasons to believe that the NBR is suffering from a sort of leadership problem. Finding out competent and relatively honest officials and placing them in the right place are very important particularly for the success of revenue mobilisation efforts. During the last fiscal year, the NBR people were found to be more aggressive and dynamic in revenue collection as well as chasing the tax evaders. For the interest of the better fiscal management on the part of the government, the NBR needs to improve its operational style, brooking no further delay.


  More Headline
Falling revenues and fiscal imperatives
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Factors hurting Bangladesh's export competitiveness
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