IMF wants plan from NBR to reduce tax exemption

The International Monetary Fund (IMF) has sought information from the National Board of Revenue concerning its strategy for achieving the increased revenue collection target given for the current fiscal year 2024-25 by reducing tax exemption. After receiving the plan from NBR, it will be presented to the global lender's board in Washington.

The matter was discussed in a meeting of the officials from Income Tax, Value Added Tax and Custom Wing of NBR today, An NBR official, wishing anonymity, said the revenue board needs to collect an additional Tk12,000 crore to meet its new target. "The IMF wants a plan for this by the end of the month."

The official stated that the income tax wing faces challenges in cutting new tax exemptions this financial year, as mid-year tax rate increases are not feasible. 

"Increasing taxes at the import stage could directly impact inflation, leaving room for the VAT wing to consider measures in the coming months," he added.

Regarding this, a VAT department official, seeking not to be named, said, "We are exploring options to reduce exemptions in certain sectors, but no final decisions have been made yet." 

NBR Chairman Abdur Rahman Khan could not be reached over the phone for comments in this regard.

According to NBR data, revenue collection in the 2023-24 fiscal year amounted to Tk362,000 crore (as per iBAS calculations), equating to 7.3% of GDP. The IMF had set a target for revenue collection in the current fiscal year to increase by 0.5% of GDP.

However, revenue collection has declined in recent months. From July to October, revenue collection fell by 1% compared to the same period in the previous fiscal year, leaving a shortfall of Tk31,000 crore against the target.

Under this circumstance, the NBR is considering lowering the revenue target. However, in Wednesday's meeting, the target was unexpectedly raised instead of reduced, causing discomfort as it exceeded the previously set goal.

Economists think that such an increased target is unrealistic under the current economic conditions.