NBR requests IMF to lower FY25 revenue target

Highlights:

• IMF set revenue target at Tk4.78 lakh crore for FY25
• NBR missed IMF's target by Tk12,000cr in FY24
• IMF particularly dissatisfied with revenue from imports
• NBR also urges IMF to reassess GDP calculations
• Bangladesh's tax-to-GDP ratio among lowest globally

The National Board of Revenue has asked the visiting International Monetary Fund (IMF) team to reduce the revenue collection target set for Bangladesh for the current fiscal year considering the country's recent political changes.

A senior NBR official, speaking on condition of anonymity, told The Business Standard that the IMF has set a revenue target of Tk4.78 lakh crore for Bangladesh for the fiscal 2024-25.

However, recent nationwide unrest has resulted in lower-than-expected revenue in the first three months of this fiscal year, and the outlook remains grim, as businesses are not operating normally yet, the official said.

"Given the circumstances, we have asked the mission to reduce the target," the official added.

The IMF team, however, refrained from commenting on the request, as another mission is scheduled to visit Bangladesh next month, the official said, adding that they also expressed dissatisfaction with the revenue performance for FY24.

NBR officials also urged the IMF to reassess the calculation of Gross Domestic Product (GDP), as it serves as the basis for the revenue target, he added.

As part of a $4.7 billion loan approved in early 2023, the global lender has imposed over 30 major and minor conditions on Bangladesh, one of which includes raising the revenue contribution to GDP, or the tax-to-GDP ratio, by 0.5% each year until 2026.

As part of this, Bangladesh was required to generate Tk3.94 lakh crore in revenue in FY24. However, on Thursday, the NBR reported to the mission that they had managed to collect Tk3.82 lakh crore, falling short of the target by Tk12,000 crore.

However, according to information from the finance ministry, the Integrated Budget and Accounting System (iBAS), a specialised software, indicated that the gap is significantly larger than what was reported by the NBR officials.

Sources indicated that, based on the iBAS information, the gap exceeds Tk30,000 crore.

Bangladesh ranks among the countries with the lowest revenue earnings relative to GDP, with the figure slightly over 7% in FY23.

A senior official from the tax wing told TBS, "We fulfilled almost all of the IMF conditions up to last June, including several major tax reforms aimed at boosting collection. Despite this, the mission questioned why we failed to meet our target."

Sources also said the IMF mission expressed dissatisfaction with the revenue earnings from the import stage.

"We informed the mission that imports have declined in recent months due to both national and international factors, adversely affecting revenue derived from imports," a senior customs official told TBS.

A senior official from the VAT division said, "We are on the right track so far, which is why the mission did not raise any negative observations regarding VAT issues."

Sources also said the mission met with NBR's newly appointed chairman, Abdur Rahman Khan, as well as other senior officials involved in policy matters.

TBS reached out to the NBR chairman for comment regarding the meeting, but he did not respond to phone calls.