Import tax grows only 5%, short of target by Tk2,500cr in Sep

Strict import rules imposed due to the dollar crisis have impacted import tax collection, with revenue collection in the sector falling short of the target by Tk2,500 crore and growth plummeting to just 5% in September of FY2023-24.

According to the National Board of Revenue (NBR), a quarter of the target import tax could not be collected during the period. Additionally, the growth in the first three months of the current financial year is only 7.5%.

Experts say the dollar crisis is unlikely to ease anytime soon, making the import situation less likely to improve.

However, despite the decrease in import tax collection, the growth in value added tax (VAT) and income tax collection remains satisfactory at 17% and 19%, respectively.

In the first two months (July-August) of the current fiscal year import tax growth was 13.7%, as per the NBR.

After the outbreak of the Russia-Ukraine war last year, the government increased import duties and required a 100% margin on all letters of credit (LCs) in an effort to control imports and conserve foreign exchange reserves.

Despite these measures, importers are reportedly struggling to obtain the dollars they need to import goods, including consumable goods, industrial raw materials, and capital machinery. This is due to a combination of factors, including the dollar crisis, which has caused the local currency to lose about 30% of its value against the dollar in the past year and a half.

According to the Bangladesh Bank, LC openings fell by 18% in the three months from last July to September. Of this, LC openings for consumer goods imports, which are one of the major sources of import tax, have declined by around 48%.

Md Lutfor Rahman, former NBR member of customs policy, told The Business Standard that the dollar shortage and rising cost of the dollar are preventing many importers from opening LCs. This is leading to a decrease in imports and a negative impact on import tax collection.

"This problem may be solved, but it is impossible to say when," he added.

According to the NBR, it collected less than Tk8,000 crore in import taxes in September, falling short of its target of Tk10,464 crore.

The International Monetary Fund (IMF) recently agreed to reduce the revenue collection target for the current financial year in order to meet the condition of the $4.7 billion loan, but stakeholders say it will be difficult to achieve even this reduced target unless imports are accelerated.

Meanwhile, NBR Chairman Abu Hena Md Rahmatul Muneem held a meeting with NBR field-level officials to discuss the revenue collection situation, particularly the low collection of import taxes despite the increase in VAT collection.

A senior NBR official present at the meeting told TBS that the decline in import tax collection is due to lower imports. The meeting also discussed ways of collecting the large amount of import tax that the NBR owes the Bangladesh Petroleum Corporation (BPC).

14% revenue growth, shortfall by Tk8,200cr

According to the NBR, revenue collection from VAT, import tax and income tax in the first quarter (July to September) of the current fiscal year grew 14%, which tax officials consider satisfactory in the current situation.

The NBR collected about Tk76,738 crore in revenue during the period, which is about Tk9,600 crore more than in the same period of the previous financial year. However, the revenue collection is still short by Tk8,200 crore than the target.

Experts say inflation has led to higher prices for goods, which has boosted revenue collection from VAT.

However, analysts say it will be difficult to achieve the NBR's revenue collection target of Tk4.30 lakh crore for the current financial year.

Dr Ahsan H Mansur, executive director of Policy Research Institute (PRI), told The Business Standard, "Achieving this target will not be easy. It will even be difficult to achieve the target set last year, which was around Tk370,000 crore."