Revenue shortfall hits Tk43000cr mark
The National Board of Revenue (NBR) reported a Tk43,000 crore revenue shortfall for the first quarter of the fiscal year 2026-27. The figure falls significantly short of the Tk1.35 lakh crore target set for the July-September period.
Sluggish business activity, muted private investment, and slow public spending are cited as the primary causes. Total revenue receipts for the quarter were just over Tk92,000 crore, marking less than 2% growth compared to the same period last year, which saw a 21% expansion.
VAT Collection Sees Sharp Decline
A key indicator of economic health, Value Added Tax (VAT) collection, recorded a steep negative growth of 16%. This sharp drop points to reduced industrial output, lower sales, and diminished consumer demand. The poor performance in VAT dragged down the overall revenue figures for the quarter.
Economists and business leaders attribute the deficit to a broad economic slowdown. Reduced consumer purchasing power and subdued imports are also factors. Some point to changes in VAT payment schedules and weaknesses in tax enforcement as additional pressures on the system.
Economic Headwinds Blamed for Shortfall
Zahid Hussain, a former lead economist at the World Bank’s Dhaka office, identified the struggling macroeconomic environment as the main driver. He stated that business activity and investment remain depressed. Persistent inflation above 8% has caused consumer demand to contract significantly. Some importers are also holding back shipments due to fears goods will remain unsold.
The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) administrator, Fazlul Hoque, agreed that broader economic headwinds are hampering performance. He noted that sales are down, private investment is stagnant, and implementation of the Annual Development Programme (ADP) is extremely low. Money circulation in the economy has tightened, while imports have failed to gain momentum.
A senior NBR official, speaking on condition of anonymity, attributed part of the VAT drop to the recent transition to quarterly returns. The official mentioned that collection from large corporate taxpayers missed targets and that slow ADP implementation further reduced VAT receipts. However, they expect revenue performance to improve in the coming months.
Low ADP Implementation Hurts Tax Receipts
Slow public spending has worsened the revenue shortfall. A significant portion of tax receipts comes from taxes and VAT withheld at source during transactions linked to government-funded projects. Data from the Planning Ministry shows ADP implementation stood at just 3.89% in the first quarter, the lowest on record for this period.
The government’s overall revenue target for FY27 is Tk6.04 lakh crore, a steep 45% increase over actual collections in FY26. Experts had previously warned that these budget targets were overly ambitious under current economic conditions. Hussain confirmed this, stating, “During the budget formulation, it was pointed out that these targets were unachievable.”
Despite the overall contraction, income tax collection grew by 16% year-on-year, while import tax receipts rose by over 7%. Analysts caution that the income tax surge may be short-lived, driven by early filings prompted by government incentives. Without major administrative reforms, a substantial rebound in receipts over the coming months remains unlikely, according to Fahmida Khatun of the Centre for Policy Dialogue.
Outlook Remains Challenging
Economists see little prospect of a rapid turnaround. Stagnant investment, sluggish job creation, and a lack of major structural tax reforms are major concerns. Hussain also warned about softening remittance inflows, which could be further affected by rising geopolitical tensions in the Middle East.
The revenue crisis occurs as growth projections have been downgraded. The Asian Development Bank (ADB) and the IMF now place Bangladesh’s projected economic growth at 3.2%, the lowest rate in 38 years. The IMF’s World Economic Outlook forecasts inflation at 10.9%, indicating continued pressure on household budgets and business activity.
