Budget for FY2014

Structure of Public Finance

Revenue Collection Dificit Financing
Abdullahil Mamun
Assistant Professor of Economics

Department of Business Administration, International Islamic University Chittagong, Bangladesh.

Sources of Revenue NBR Tax Revenue Ambitious revenue target Non-NBR Tax Revenue Tax Revenue Figure-3: Sources of Revenue in Non-Tax Revenue Total Tax Revenues Budget 2013-14
Non-Tax Revenue 15.67%

Revenue Collection Targets

2012-13 112259 4565 116824 22846 139670

2013-14 Growth 136090 21.23% 5129 12.35% 141219 20.88% 26240 14.86% 167459 19.90%

Source: Budget Documents, 2013-14, MOF. Non-NBR Tax Revenue 3.06%

NBR Tax Revenue 81.27%

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 ambitious
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Revenue Collection Targets

Figure-04: Share of Revenue FY2014
Other 1.4% Non-NBR Tax Revenue 3.1% Non-Tax Revenue 15.7% Value Added Tax (VAT) 33.8%

Figure-05: Incremental Share of Revenue FY2014

Import Duty 8.7%

Supplemen tary Duty 12.5%

Value Added Tax (VAT) 29.8% Taxes on Income and Profit 28.8%

Non-Tax Revenue 12.1% Sup. Duty 3.2% Other 1.3% Import Duty 1.3% Non-NBR Tax Revenue 2%

Taxes on Income and Profit 46.3%

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

Revenue Collection Targets

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 12.1 167459 100

Meeting ambitious revenue target from income tax and profit is challenging 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.
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Revenue Collection Targets

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 VAT with 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. 5

Deficit Financing
Figure-6: Deficit Financing (in %)
External Sources 18.49 Bank Borrowing 12.06 8.00 Non-Bank Borrowing 14.48

57.39 52.78 61.24

47.23

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
28.74 26.71

34.60

38.28

2010-11

2011-12

2012-13

2013-14

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