VAT receipts tank on economic lull

Collection of value-added tax, the biggest source of revenue for the government, dropped 1 per cent in the first 10 months of the fiscal year to Tk 67,760 crore as the countrywide shutdown since March 26 that have brought almost all economic activities to a standstill is starting to show its effect.

In April, VAT collection, which accounts for 39 per cent of total tax receipts, plummeted to Tk 3,650 crore from more than Tk 6,000 crore a month earlier, in what can be viewed as the clearest indication of the economic toll of the shutdown.

This has led the National Board of Revenue to ask its VAT field offices to devise strategies to boost collection as the overall receipts of the indirect tax fell far behind the revised target of Tk 108,600 crore for this fiscal year.

To attain the revised target, revenue officials have to collect Tk 20,000 crore in both May and June against the average monthly collection of Tk 6,777 crore in the first 10 months.

"We are aware of the latest situation. The situation may prevail or improve. Whatever the situation is, we have to proceed by devising required strategies to attain the target," said the NBR directive, issued by Md Jamal Hossain, NBR member of VAT implementation, on May 10.

The revenue authority would now be targeting items that generate higher revenue, the directive said, citing areas such as cigarette, mobile usage, mobile financial service providers, internet and medicine.

Intensive communication should be established with big firms. Besides, attention should be given on realising VAT arrears and collection of VAT-at-source, it said. 

As part of its efforts to mobilise VAT collection, the NBR has asked its field offices to stay open next Friday, which happens to be the 15th of the month, which is the last day for businesses to file returns for April.

The NBR received 31,000 returns last month, which is half the number it got the previous month.

This has prompted the revenue watchdog to direct its offices to enquire whether firms that did not file statements for March were actually closed or they ran their operations in secret.

The VAT Commissionerate in Dhaka North and Chattogram detected some firms that were up and running although they declared their businesses were shut because of the shutdown.

Nearly 90 per cent of the government revenue comes from tax collection, of which 65 per cent are from indirect taxes, including VAT and other duties.

However, the pandemic is expected to significantly reduce tax receipts, said the Asian Development Bank last week.

Non-tax revenue will also be severely affected by the reduction of imports and other fee sources. A minimum revenue loss of 2 per cent of GDP ($6.7 billion) is projected by the government, said the Manila-based lender in a document.