Duty-taxes on dev projectsRevenue concern forces NBR to lift exemptions

The National Board of Revenue (NBR) has asked the government agencies to add duty and taxes to the cost of their development projects that have been enjoying exemptions so far.

"All government ministries, departments and wings are requested to obtain allocations from the finance division through estimating duty-taxes rather than seeking tax exemptions," it says in a formal communication.

In a bid to increase the lowly tax-GDP ratio, the National Board of Revenue has taken the stance on discouraging government entities from seeking tax waiver on development projects

In a letter to some 281 government entities, including ministries, departments, institutes, bureaus, commissions, boards, authorities, academies, NBR chairman Abu Hena Md Rahmatul Muneem made the request for cooperation in achieving the tax-revenue-collection target set in the budget.

He urged the entities to take necessary administrative measures to pay tax from government-allocated funds.

Following a directive of Finance Minister AHM Mustafa Kamal, the NBR sent the request for adopting the strategy for the sake of boosting country's revenue earning.

Tax exemptions on the different megaprojects and other development projects account for a huge amount of revenue although there are no compiled data to quantify, tax officials say.

Import of capital machinery and raw materials, remuneration of technical experts and several other areas of development projects are enjoying tax waiver.

Three wings of the NBR-income tax, VAT and customs duty-offered tax exemption on development projects through separate SROs.

Tax exemption in different development projects is a major barrier to increasing country's tax-GDP ratio, the NBR chairman wrote in the letter.

"I believe the tax-GDP ratio could have doubled from the current position if the NBR could realise exempted taxes," he added.

In a meeting earlier in 2016, the finance minister had instructed encouraging taxpayers for developing tax culture and paying taxes from government budget allocations for the projects.

In the 2019-20 budget, the finance minister's speech, para 49, clearly asked for avoiding tax exemptions as much as possible and not issuing SRO except in emergencies.

Executive Director of the Policy Research Institute (PRI) Dr Ahsan H Mansur appreciates the step of the revenue board for the sake of maintaining fiscal discipline.

He says tax exemption should not be offered through Statutory Regulatory Order (SRO) after budget, unless there be any emergency.

The NBR should discuss with the businesses and taxpayers before imposing any tax.

"Tax measure is not a confidential matter. The NBR should maintain transparency on it," he says.

The NBR chairman could not be reached over the phone for his comment.

The country's tax-to-GDP ratio is below 8.0 per cent-the lowest in South Asia.

According to a preliminary study by the NBR, tax exemption eats up 2.28 percent or Tk 578.78 billion of the country's GDP.

In the current financial year, 2021-22, the NBR has to collect Tk 3.30 trillion in revenues to finance the national budget no less than Tk 5.0 trillion in size despite pandemic disruptions to economic activity.