Tax net widening is a must

FE Team | Published: May 09, 2024 21:36:40

One of the much talked-about mechanisms for raising NBR revenue as well as bringing a sense of rationalisation in the country's Tax-GDP ratio is the expansion of tax-net. No doubt, the low Tax-GDP ratio is an indication of the narrow tax net that despite promises for widening every year in the budget announcement has remained unchanged for the most part. As the budget announcement for the next fiscal is nearing, experts including economists consider expanding the tax net as a prime concern to ramp up tax-GDP ratio beyond where it is now-the lowest in South Asia. Mentioning that the budget is in a 'difficult time', they said the government would have to fine-tune fiscal policy on increasing tax revenue alongside infusing measures to check domestic and international shocks. Their views and recommendations on Bangladesh's economic and financial regime came at a roundtable titled 'Budget 2024-25: Key Considerations for Strategic Sectors', organised by Policy Exchange Bangladesh in the capital this week.
For long, it has been the practice to depend more on the tax payers who have already been paying taxes. But then, those having big turnovers or running corporate businesses also enjoy rebates and the IMF suggests a uniform rate of 15 per cent corporate tax. The introduction of Tax Identification Number (TIN) and its requirement to open a bank account and a host of other activities including automobile fitness test, buying and selling of property etc., did not actually need the evidence whether the incumbent submits his tax return or is eligible to pay taxes. TIN, thus, was no more than a proof of registration with the tax authorities. No doubt, making it mandatory was a big job done, but what was needed in course of time, over the past decade or so, was to see that taxes, however small, are not missed out, or in other words evaded by the TIN holders. There are innumerable TIN holders running small businesses or earning from various sources who are outside the tax net. Reportedly, there are as many as 40 million middle income people in the country who do not pay taxes.
While bringing wealthy evaders to book is the prime responsibility of the tax authorities, such drive does not usually have any major impact on revenue collection. So, essentially, it is a combination of regular tax collection and bringing in new tax payers within the fold that can help revenue mobilisation at the desired level.
Speakers at the aforementioned roundtable emphasised digital taxation system, incorporating coordination among departments and ministries in and out of the National Board of Revenue (NBR). They also pointed out some anomalies in the taxation system, including those in VAT collection. As regards indirect taxation, some speakers opined that increasing further indirect tax amid growing inflation would adversely affect the poor. While addressing these is important, widening the tax net remains the key issue that conscious citizens consider a must under the prevailing situation. Reforms to broaden the tax net should be comprehensive and innovative that can generate revenue for the state not only in short but also in the long run.