The National Board of Revenue (NBR) plans to collect an additional Tk11,450 crore by increasing value-added tax (VAT) rate and reducing exemptions in six key sectors.
These sectors are tobacco, mobile phone talk time and internet use, excise duty on bank deposits, sugary items, VAT deduction at source, and electronic items.
The NBR has already provided a sector-wise breakdown of its VAT collection target to the finance ministry as part of its renewed fiscal measures proposals.
The VAT collection target for the just concluded FY24 was Tk1,51,700 crore. This target has been increased by about 17 percent to Tk1,77,000 crore for FY25.
However, the amount of VAT for FY24 has not been finalised yet. If the target for FY24 is achieved, NBR will need to collect an additional Tk25,300 crore in VAT in the current fiscal year FY25.
"Normal economic growth and inflation will naturally lead to a normal increase in VAT. Additionally, the fiscal measures, including the increased rates of new VAT and supplementary duties, will enable the recovery of this additional VAT," a senior NBR official told The Daily Observer.
The NBR aims to generate the highest VAT revenue from tobacco sector. In addition to increasing the value of tobacco products in the budget, the rate of supplementary duty has been raised at all levels.
In FY22, about Tk33,000 crore was collected in VAT and SD from the tobacco sector. With the new higher rate NBR expects to collect an additional Tk6,000 crore.
The telecom sector is another significant target for NBR. Increasing tax on mobile phone talk time, internet usage, and SIM cards can generate an extra Tk1,800 crore.
Moreover, raising excise duty on bank deposits can generate an additional Tk1,000 crore from customers, while Tk400 crore can be collected from air conditioners and refrigerators, and Tk250 crore from sugary items, including beverages and ice cream.
Furthermore, if an entity has an annual turnover of more than Tk10 crore, it will be required to deduct VAT at source at a fixed rate on its expenditures. This measure is expected to generate an additional Tk2,000 crore.
However, this additional revenue will result in consumers bearing the burden of the increased VAT target of more than Tk25,000 crore in the new financial year. Consumer representatives have consistently opposed raising the VAT rate, viewing it as an indirect tax that disproportionately affects consumers.
SM Nazer Hossan, vice president of Consumer Association of Bangladesh (CAB), said "In addition to VAT, additional import taxes collected at the import stage will increase the prices of goods, effectively acting as indirect taxes. This could further burden consumers, especially amidst already high inflation."
"Instead, increasing income tax rate, focusing on reducing tax evasion and corruption would boost revenue collection," he said.
