The ITD is responsible for evaluating income, expenditure, and accretion of wealth of every taxpayer without exception. Hence some people tend to believe that corruption can be combared using taxation within the existing legal framework by claiming back a significant portion of ill-gotten money, thus making corruption significantly less attractive. The only condition is income tax officials must be free from corruption themselves, and must fulfill their duties diligently without fear or favor.
In crime thrillers it is often seen that clumsy thieves leave fingerprints behind at the crime scene. Similarly, dirty money is also untrustworthy, disloyal, and its owners in most cases find it difficult to explain its source. All corrupt deals leave an invisible trail for the ITD officials to sniff, trace, and take action.
When ITD officers become aware of undisclosed assets belonging to a taxpayer, they are required to conduct a thorough inspection to ascertain the true extent of these assets. Subsequently, they assess the tax payable by the taxpayer for the entire undisclosed asset, usually treating it as income for the relevant tax year.
According to Section 20 of the Bangladesh's Income Tax Act, 2023, Income Tax authorities are mandated to levy a 50 per cent tax on the value of undeclared investments that have not been reported in income tax returns. Consequently, the failure to disclose such investments may lead to forfeiting half of their value to the government exchequer.
However, given that the Income Tax Act of 2023 is a recent enactment, there are limited instances of this section's application.
In practice, the mechanism engaged by the Income Tax authorities to address potential tax evasion or the underreporting of income often aligns with Section 212 of the Income Tax Act 2023 (formerly Section 93 in the now-repealed Income Tax Ordinance, 1984). Taxpayers are individually assessed based on tax laws specific to their situations, but a common approach involves treating unreported assets as income and taxing them accordingly. Typically, the income of male taxpayers exceeding 1,650,000 taka is taxed at a rate of 25 per cent. In a hypothetical scenario where a government officer illicitly amasses Tk. 40 million and the income tax department becomes aware of it, he would be required to relinquish 1/4th of the amount (Tk. 10 million) to the government.
However good the revenue collection system may be in theory, it falls flat on its face if there's corruption within the tax department itself. Suppose a corrupt government employee amasses Tk. 200 million by illegal means and an income tax officer traced the illegal gain. The former got off the hook paying a sizeable bribe to the latter. Thus corruption not only persists, but also expands its tentacles.
The duties of income tax authorities can be broadly divided into two categories: Investigatory and Assessment.
Investigatory duties include discovering and disclosing undisclosed assets and unreported income. Income Tax inspectors who, generally, occupy the lowest tier in the hierarchy of the income tax department usually perform investigations at field level.
On the other hand, circle officers (individuals holding the office of Deputy Commissioners of Taxes) are responsible for assessment duties. They assess taxpayers' incomes and apply tax according to law. Most often, officers rely on assumptions regarding an individual's income and do not delegate inspectors for in-depth inspections. Only in a handful of cases inspectors are assigned to report on ground realities. This happens for various reasons such as: (a) high volume of cases, (b) inspections would not be practical and (c) illicit arrangement between Tax officers and taxpayers that results in a lower tax burden. Actual investigations properly done by inspectors, obviously, might reveal more undisclosed taxable income and assets and boost national revenue.
Inspection work is of utmost importance and a vital element to the overall success of the department keeping a tight grip on tax receipts, but inspectors are severely hamstrung as they lack proper fieldwork support. They visit homes, businesses, and workplaces in near and far-away places, but don't receive logistical support or even their travel expenses. Their only options are to pay from their own pocket or take money from taxpayers, which is ludicrous. It is as if the government expects them to be taking bribes from the taxpayers they are investigating so it doesn't need to cover their travel and tiffin expenses. Obviously, if the taxpayers under investigation do pay travel expenses to tax inspectors, it would influence their reporting and undermine the government's objectives of unbiased tax investigation. This couldn't be right and must be changed to enable the inspectors to fulfill their duties ethically, efficiently, without bias or influence and encouraging them to become corrupt.
Income tax officers of the NBR are responsible for tax assessments according to the Income Tax Act 2023, making them the primary implementing authority for this newly enacted legislation, effective from July 2023. Formulation of this law was undertaken by income tax officers themselves, presenting inherent conflict of interest. Conflict arises from the fact that the very individuals tasked with implementing the policy are also the architects of the policy itself! This dynamic raises concerns about the likelihood of policy decisions being influenced by self-interest rather than an objective assessment of what is in the best interest of the general public.
There are widespread allegations that a significant number of income tax officers exploit their authority in tax assessment to personally benefit financially. The absence of a robust system of checks and balances allows and encourages these officers to engage in questionable practices without accountability.
Except for the arrest of an income tax officer in Rajshahi in April 2023 with Tk 1.0 million bribe money, there is no other example of income tax officers facing prosecution for their misconduct in the last one decade or so. This fosters a belief that they have a carte blanche to engage in any actions they desire to generate personal income, perhaps with kickbacks to those at the top.
Moreover, it's an open secret that many employees within the income tax department - from officers to support staff - serve as income tax advisers to taxpayers. This dual role raises concerns. Lack of separation between advisory roles and official responsibilities within the income tax department creates an environment where they prioritize the interests of taxpayers over those of the government.
Thus the income tax department remains bogged down by a host of malpractices. A staggering 85 per cent of all income tax is collected at source, mostly automatically, so the actual contribution of income tax officers towards tax collection is minimal. It is, therefore, about time the government streamlined the tax administration by addressing aforementioned shortcomings if it is sincere enough to boost revenue and eradicate corruption.
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