Holding tax evaders to account

Evasion and avoidance of tax by individuals and corporate businesses cause substantial revenue loss to the nation. According to an estimate made by a local think tank, tax evasion alone is costing the nation between Tk 418 billion and Tk 2,230 billion a year. When tax avoidance is taken into account, the loss amount goes up further. Notably, tax payment is avoided when individuals or organisations cheat government by not paying tax, while avoidance is when tax liability is reduced using legal loopholes. Overall, going by that estimate, potential loss to the nation's tax revenue through tax evasion and tax avoidance would come to between Tk558 billion and Tk2925 billion a year.

So, when the revenue department has always been in a struggle to meet its annual revenue collection target, the government, at the same time, is allowing a section of the business community and individuals to deprive the economy of funds worth billions of taka annually. All this is happening on adoption of dishonest methods like showing less income than actually earned by the companies and individuals often with support from unethical tax practitioners, claiming more investment allowances by companies than justified and carrying out informal or cash-based transactions extensively. This is simply unacceptable. However, a recent report published in this paper that the tax regulator has finally put its foot down on the matter, though belated, is still welcome. The Central Intelligence Cell (CIC) of the National Board of Revenue (NBR) is learnt to have launched a campaign against corporate entities based on, what the report says, suspicion of tax evasion by the businesses concerned.

Understandably, the objective of such drives against the companies so suspected would be to ensure their tax compliance. The report further states that a reputed private hospital of the city, which had allegedly been hiding its real income and evading source taxes has already come under the NBR's action to this effect. Hopefully, the NBR's drive against corporate tax evasion would prove useful and send a strong message to other tax-evading business entities and individuals. While the move is commendable, the campaign has to be run on a sustained basis. Also, mounting such raid against any business entity should better be done on the basis of hard information rather than on mere suspicion so that it may not appear persecutive and can stand any legal challenge. Otherwise, the very purpose of ensuring tax compliance from the suspected-to-be errant corporate houses might be defeated. As records show, the country has over 288,466 companies registered with the Registrar of the Joint Stock Companies and Firms (RJSC). Unfortunately, going by the NBR record, only 30,000 corporate houses, which is around 10 per cent of all the companies so registered, submit tax returns to the revenue authority.

Regrettably, in South Asia, Bangladesh has one of the lowest tax-GDP ratios at 7.9 per cent, whereas, ideally, it should be at least 15 per cent. To reach the benchmark (at 15 per cent), the NBR would be required to collect an additional amount of Tk2506 billion as tax. Obviously, it is going to be a humongous challenge before the tax authority to achieve the target. So, to meet its goal of bringing all those evading tax or avoiding due amounts under tax net, the tax regulator should be adequately equipped with the required manpower and other technical resources. Most importantly, the need for the political will to carry out the task through to the end cannot be overemphasised.