Unrealistic budget is always unachievable16 June 2021
THE New Nation reported on Tuesday that businesses and regular taxpayers will remain under extra pressure to fulfil the unachievable revenue target because of unequal tax policy proposed in the budget. This will encourage taxpayers to evade taxes. It said the revenue collection projected at Tk 3.3 trillion in the budget has no clear roadmap; this is the biggest challenge. The present business environment is not conducive to achieve the target. In our view such higher revenue target is over ambitious on the one hand and unrealistic on the other to bring unjust pressure on regular taxpayers. Consequently, tax officials may ask for higher tax on regular tax payers to fulfill targets forcing many either to evade tax payment or negotiate with tax officials a way out.
One knitwear industry leader has indicated that tax officials are already using unfair methods withholding final settlement report on payment of 0.5 per cent Advance Income Tax (AIT) on export procedure. In his view the NBR is keeping the path open for corruption.
It appears that the proposed budget has relaxed tax policy reducing corporate taxes and Value-Added Tax (VAT) in some cases and also exempting Advance Tax on import of some essential goods. This is good but would obviously reduce tax collection in the absence of strong directions to widen the tax net and to overcome the revenue loss. In this situation if money laundering and other ways of revenue leakages continue as there is no credible measures in the budget to stop them, the revenue shortfall will surely be too big and fall short of funding the budget.
NBR officials made no secret that revenue targets may be unattainable given the tax rise mainly on tobacco products, sales and mobile phone services and few other items. NBR hopes revenue targets would be achievable only if business growth is up 15-20 per cent. This is not clearly visible because credit flow to private sector is only 14 per cent, much less than the target to boost business amid the pandemic. If private investment is not picking up to expand business, revenue collection would fall far behind.
We have always said that the size of a budget and its revenue target must be realistic and achievable. A big budget with a big revenue target mainly for political demonstration is totally misleading.