Collection of tax revenue by the National Board of Revenue (NBR) fell short of the target by Tk 315.08 billion in the first half (H1) of the current fiscal year (FY), 2019-20, due to sluggish economic activities, including import slowdown, tax officials said.
Three wings NBR -- Income Tax, Customs and VAT -- missed their respective targets for July-December period, according to provisional data released on Sunday.
Import and export tax revenue faced the highest shortfall of Tk 131.73 billion, followed by Tk 109.05 billion from VAT at local stage and Tk 78 billion from income and travel taxes.
The aggregate tax revenue collection stood at Tk 1.05 trillion until December against the target of Tk 1.36 trillion set for the period.
In the first six months, the NBR fulfilled only 32.29 per cent or one-third of its aggregate revenue collection target for FY 20.
Officials said it will be difficult to achieve the ambitious revenue collection target of Tk 3.25 trillion set for the current FY.
The NBR has been failing to achieve its annual tax revenue collection target since 2015.
Economists said such huge shortfall in internal revenue collection will increase the government's budget deficit in the current FY exceeding 5.0 per cent for the first time.
Distinguished Fellow of the Centre for Policy Dialogue (CPD) Dr Debapriya Bhattacharya said shortfall in revenue collection will have a serious impact on the economy.
"The budget deficit might be more than 5.0 per cent this year for the first time in a decade."
The government's bank borrowing may also increase to meet the deficit, putting pressure on private sector credit flow.
There is a serious mismatch between the government's growth projection and the revenue collection performance, he added.
Dr Ahsan H Mansur, Executive Director of the Policy Research Institute (PRI), said the revenue shortfall may hover around Tk 800-900 billion in this FY.
"Budget deficit might rise to 6.5 per cent for the first time, unless the government cuts its expenditure by a big margin."
By the year-end, the tax revenue collection shortfall might be 2.5-3.0 per cent of the Gross Domestic Product (GDP), which might be difficult to manage even by slashing expenditure, he added.
The government's bank borrowing soared to Tk 508.42 billion until January 15, 2020, whereas the borrowing target for FY 2019-20 was Tk 473.64 billion.
The government is planning to increase its bank borrowing target for current FY following the significant shortfall in revenue collection.
Talking to the FE, a senior official said challenges in implementation of new VAT law, decline in import of revenue-generating products, and slow pace of reform in direct tax wing are the major reasons for failure in achieving the expected growth in tax revenue collection.
The revenue collection target was set with the hope of nearly 40 per cent growth over the actual tax collection last year, while the average annual revenue collection growth has been 13.16 per cent in last five years.
Despite several negative factors, tax revenue collection growth improved slightly in December last, he added.
The NBR achieved 7.39 per cent growth in revenue collection in July-December period over the corresponding period of last FY, according to provisional data.
The tax revenue collection growth was 6.39 per cent in the same period last year over that of the previous year.
In July-December period of this FY, VAT Wing collected the highest amount of revenue worth Tk 410.91 billion, followed by Income Tax at Tk 326.46 billion, and Customs at Tk 314.23 billion.
Income tax collection witnessed the highest growth of 13.66 per cent, followed by VAT of 7.06 per cent, and customs duty at 1.96 per cent in H1 compared to that of the same period of FY 19.