Unnayan Onneshan, a local think tank, on Saturday said that the government might miss its revenue collection target in the current fiscal year, constraining the economic growth of the country. In its current issue of Bangladesh Economic Update of November, the organisation also estimated that the gap between targeted and realised revenue might increase further by Tk 818 crore in the FY 2013-2014 from that in the FY 2012-13.
UO identified some problems including narrow tax net for lower revenue mobilisation.
‘The prevalence narrow tax net along with wide opportunities of evading and avoiding tax and structural weakness in taxation system acts as a hindrance to having a stronger revenue base in the country,’ it said in its update under the title ‘revenue mobilisation and economic growth’.
Only 1.4 per cent of population of the country is under the income tax net while less than one per cent actually pays income taxes, it said.
The think tank said that the inability to raise taxes at a higher rate was affecting the ability of the government to fund critical sectors for economic development, especially expenditure on investment and social and physical sectors.
Referring to the structural rigidities of the economy such as increase of the informal sector, the organisation said that the rise of the sector added to the difficulty of the government in increasing the base of collection of direct tax.
Between 2002-03 and 2010, employment in the formal sector declined by 26.09 per cent while that in the informal sector grew by 34.76 per cent, it said.
Despite putting emphasis on direct taxes in recent times, the government failed to bring any significant change to the ratio of direct to indirect taxes as about 73 per cent of taxes come from indirect taxes such as value-added tax, UO said.
Consequently, the low earning groups have been bearing the maximum burden due to expansion of the VAT, it said.
It also observed that the gap between total expenditure and total revenue was getting bigger over the years and if the trend continues, the gap will be wider to Tk 55,850 crore in the next fiscal year from the targeted Tk 55,532 crore.
For the promising economic performance, the gap needs to be narrowed, it said.
-With New Age input
