budget for fy2014- structure of public finance- revenue collection and deficit financing

7/28/2019 Budget for FY2014- Structure of Public Finance- Revenue Collection and Deficit Financing

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Budget for FY2014

Structure of Public Finance Revenue Collection Dificit Financing

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Abdullahil MamunAssistant Professor of Economics

Department of Business Administration,

International Islamic University Chittagong,

Bangladesh.


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Revenue Collection Targets

NBR TaxRevenue81.27%

Non-NBR

TaxRevenue

3.06%

Non-TaxRevenue

15.67%

Figure-3: Sources of Revenue inBudget 2013-14

Sources of Revenue 2012-13 2013-14 Growth

NBR Tax Revenue 112259 136090 21.23%

Non-NBR Tax Revenue 4565 5129 12.35%

Tax Revenue 116824 141219 20.88%

Non-Tax Revenue 22846 26240 14.86%

Total Tax Revenues 139670 167459 19.90%

Source: Budget Documents, 2013-14, MOF.

Ambitious revenue target

NBR Tax Revenue

In July-April period of FY2013,only 74% of NBR tax revenue

target is met

An impossible growth target by

27.4% NBR has to confirm to earn

the left 26% revenue in FY2013 For FY2014,NBR tax revenue

target which is 81.3% of total

revenue and 21.22per cent higher

than FY2013

It is unrealistic and ambitious2


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Non-NBRTax

Revenue3.1%

Non-TaxRevenue

15.7%

Taxes onIncome

and Profit

28.8%

Value

Added Tax(VAT)29.8%

ImportDuty8.7%

Supplementary Duty

12.5%

Other1.4%

Figure-04: Share of Revenue FY2014

Value AddedTax (VAT)

33.8%

Taxes onIncome and

Profit46.3%

Non-NBR TaxRevenue 2%

Import Duty1.3%

Sup. Duty3.2%

Other 1.3%

Non-Tax

Revenue12.1%

Figure-05: Incremental Share of RevenueFY2014

Dependency on INCOME and VALUE-ADDED TAXES (VAT) Income tax revenue is increased by 36.82% while its incremental share picks to

record 46.3% VAT is increased 23.45 percent with a record incremental share of 33.82%


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Meeting ambitious revenue target from income tax and profit ischallenging for the following reasons:

Increasing the tax-free income limit for individual taxpayers to Tk 2.2

lakh from Tk 2 lakh, Cutting the existing minimum tax to Tk 2,000 from Tk 3,000 for

people in district towns

Cutting the existing minimum tax for taxpayers in suburbs and villages

from Tk 3,000 to Tk 1,000, and

Lacking direction to spread the tax net.


Revenue Targets for FY2013-14

Sources of Revenue Tk in Crore Incremental Share

Value Added Tax (VAT) 5129 33.82

Taxes on Income and Profit 26240 46.32

Non-NBR Tax Revenue 48297 2.01

Import Duty 49956 1.32

Supplementary Duty 14629 3.15

Other 20853 1.28

Non-Tax Revenue 2355 12.1167459 100

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VAT During July-April of FY2013, revenue collection through VAT attained 18.6

percent growth against the annual growth target of 12.1 percent.

It may encourage the government to set 23.45 percent growth target for VATwith a record incremental share of 33.82%

Non-NRB Tax Revenue Non-tax revenue target is Tk. 5,129 crore, which is 3.06% of total revenue and

12.4% higher than revised non-tax revenue target of FY2013.

In July-December period of FY2013, non-NRB revenue growth is 14.4% against

25.7% of the corresponding period of FY2012

Non-tax Revenue Non-tax revenue target- Tk. 26,240 crore: 15.67% of total revenue, 14.85%

higher than revised non-tax revenue target of FY2013. Due to its susceptible nature, growth of non-tax revenue during the first half of

FY2013 was 17.8% as against annual growth target of 23.2 percent.

As the growth targets for nonNBR tax and nontax revenue are lower than their

benchmarks, the current trend of revenue collection by NonNBR and NonTax

component could result in a shortfall in FY 2013-14.


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28.74 26.7134.60 38.28

52.78 61.24

57.39 47.23

18.4912.06 8.00 14.48

2010-11 2011-12 2012-13 2013-14

Figure-6: Deficit Financing (in %)

External Sources Bank Borrowing Non-Bank Borrowing

Sources of Deficit Financing (In Crore Tk.)

2010-11 2011-12 2012-13 2013-14

External Sources 10007 11859 17183 21,068

Bank Borrowing 18379 27,191 28500 25993

Non-Bank Borrowing 6438 5354 3973 7971

Tota Deficit 34824 44404 49656 55032

Bank Borrowing

Target for FY2014: Tk.25,993 crore, 47.23%

of total deficit, 11.68% of total Budget

24% of official reserve of Tk. 1,08,190 crore

Target of FY2013: Tk 23,000 crore, actual

borrowing Tk.28,500 crore, which is 23.91%

higher than the target.

Consequences Though the borrowing target is 8.8% less than FY2013, but continuation of

current trend may witness a total of over Tk. 32200 crore borrowed from

banking system by the end of the FY 2014.

High bank borrowing may crowd out private sector borrowing

Likely to raise interest burden further in economy

Toned down the pace of economic growth

Deficit Financing

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