The government should set up a separate commission for reforming the tax structure, advised experts on Saturday.
At the same time, the chairman of the National Board of Revenue should have five-year tenure to ensure policy continuity and bring about long-term reforms, they said.
"It is time to form a separate finance commission to bring about extensive reform in the entire tax structure," said former finance advisor A. B. Mirza Azizul Islam.
"That commission should look into bringing substantial reforms in the tax system including direct tax and indirect tax," he added.
His comments came at a seminar organised by the Department of Accounting and Information System of the University of Dhaka on tax policy and public finance.
Mr. Islam observed that Bangladesh's present tax system does not promote savings, investment and growth.
"At the same time, it is not promoting equitable distribution of income," he observed.
"This is because our revenue collection system is too much dependent on indirect tax rather than direct tax," said Islam.
"Indirect tax is much more regressive and not helpful for ensuring equitable income distribution," he observed.
"The NBR has taken lot of reform initiatives in recent years. But since the introduction of VAT in 1991, there has not been a single reform that has been successfully implemented and produced a result," said Dr. Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.
The internationally acclaimed economist also termed the NBR a "graveyard littered with tombstones of reforms."
"One major problem is the lack of continuity," he said, adding "The NBR has probably seen the highest turnover in leadership and that is not good".
"I strongly suggest that the Prime Minister should appoint the NBR chairman for five years with a Terms of Reference having specific targets to deliver on and make him or her accountable for that ToR," Dr Mansur said.
"NBR Chairman is not a position for one or two years' term and no reforms can be brought within such a small space of time," he added.
He called for introducing top-down reforms at the Board.
"If you want to reform the NBR, it has to be top-down rather than bottom-up," he said.
"There are too many vested interests between business and tax officials. So, these reforms have to be hammered down to the ground level," he added.
"When it comes to tax policy, we want a measure of certainty," said Barrister Nihad Kabir, President of the Metropolitan Chamber of Commerce and Industry in Dhaka.
"We want to see a clearly articulated policy which we can follow in making our business decisions in the next five to seven to 10 years," she added.
She also pointed at the 'excessive' rate of taxation for the non-listed companies in the country.
"Even during the last fiscal, tax was reduced for only banks and listed companies. Now, there are only 354 listed companies in the country while the number of unlisted companies is in lakhs," she added.
In his response, chairman of the NBR Md. Mosharraf Hossain Bhuiyan rejected the notion coming from the private sector that the tax rate in Bangladesh is one of the highest in the world.
The rate of tax for listed companies is 34 per cent in Brazil, 25 per cent in China, 23 per cent in Egypt, 33 per cent in France, 35 per cent in India, 30 per cent in Pakistan, 28 per cent in Sri Lanka, 25 per cent in Myanmar and Indonesia, 30.86 per cent in Japan and 30 per cent in Kenya, he said, citing examples.
In Bangladesh, it is 25 per cent at best," he said. "Only, tobacco companies and mobile companies have to pay higher tax rate of 40 to 45 per cent."
He observed that it is difficult to increase the amount of tax due to the wide-ranging tax rebates and incentives enjoyed by various local industries, RMG sector as well as various development projects.
Currently, the government is providing tax incentives for bonded warehouse facilities for the growth of export, but many people are abusing this facility.
"Is it possible for the NBR to monitor all of them?" he asked.
Speaking at the event, Prime Minister's economic advisor Dr. Mashiur Rahman called for bringing the informal sector under the tax net.
"Currently, more than 50 per cent of the economy is still informal sector while 85 per cent of the employment is still informal," Dr Rahman said.
"This huge informal sector should be gradually brought under the tax net to increase revenue generation in the country", he added.
Former Chairman of NBR Dr. Nasir Uddin said that tax policies of the country should be based on extensive research.
"Top universities and think tanks can play a highly supportive role in such research work", he said.
Noting that the VAT Online project of the government is currently stagnated, he said that a strong online VAT collection system and electronic procurement scheme can help the government boost its revenue.
Delivering the keynote presentation, Professor Dr. Mizanur Rahman of Dhaka University called for the reduction of corporate tax in the country.
"A reduction in corporate tax, among other things, would help corporate businesses generate more operating cash flows and so conserve more cash for their businesses." he said.
"A scope to conserve more cash essentially implies that the after-tax cash flows to investors will rise in the long run," he added.
Chief Executive Officer of Standard Chartered Bangladesh Naser Ezaz Bijoy, Dean of the Faculty of Business Studies Professor Shibli Rubayatul Islam, Professor of International Business of the same university Khondoker Bazlul Haque also spoke at the seminar.
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