Age-old double-taxation agreements turn deadweight by leaving little scope to tax digital businesses not having permanent establishments in Bangladesh, thus shrinking avenues for revenue mobilisation.
As such, taxmen say, the revenue authority felt the need for upgrading the Double Taxation Avoidance Agreements (DTA) to include the option, which the OECD models have incorporated too.
GM Abul Kalam Kaikobad, Member of the Income Tax Audit, Intelligence and Investigation wing of the National Board of Revenue (NBR), made the statements at a programme organised by Business Initiative Leading Development (BUILD) on its premises in Dhaka.
Ferdous Ara Begum, Chief Executive Officer (CEO) of BUILD, delivered welcome address while Senior Research Associate of the organisation Md Nooruzzaman and Snehasish Mahmud & Co partner Snehasish Barua presented two separate keynotes on 'Introduction to Income Tax Act-2023-Due diligence by taxpayers' and 'Challenges and opportunities of ITS 2023', respectively.
Dr Jamal Uddin Ahmed, former chairman, Janata Bank Ltd, moderated and chaired a discussion session, participated by Dr Muhammad Abdul Mazid, former chairman of the National Board of Revenue, Md Alamgir Hossain, former member of the NBR, Hasan Mahmood, partner, M.J Abedin & Co, Dr Dhiman Kumar Chowdhury, Chairman, Department of accounting and information system, the University of Dhaka, and former president of the Institute of Chartered Accountants of Bangladesh (ICAB) Md Shahadat Hossain.
Mr Kaikobad aired doubt over getting cooperation of the other countries in amending DTA for taxing such virtually operating businesses.
"The nature of financial transactions has been changing over the years since Bangladesh signed DTA with other countries. Now, it seems difficult to tax the businesses having no PE in Bangladesh as per DTA," he said.
Discussants pointed out several flaws in the new income-tax law, including problems in its adoption.
Dr Mazid said the NBR should conduct periodical stakeholder consultations to help taxpayers get accustomed to the new act.
He alleged that the direct tax is turning to indirect taxes due to higher source taxes.
Dr Mazid said some 170 countries have tax ombudsman in laws which Bangladesh scrapped in 2011, just six years after its introduction.
Hassan Mahmood pointed out several discriminatory measures in the new tax act, including Provident Fund, Workers Profit Participation Fund etc.
"The open-ended scope without time bar of six years may panic the taxpayers on its adverse implications," he told the meet.
Mr Alamgir recommended upward revision in corporate taxes and higher surcharges to mobilize more revenue from well-off section for ensuring proper redistribution of income.
He, however, found corporate-tax cut futile due to having minimum tax provision that limits refund of excess paid taxes.
He thinks separation of tax policy from implementation is not the only solution for tax reform given the age-old organogram in tax department.
Former ICAB president Mr Shahadat Hossain said mutual trust and confidence is necessary to encourage taxpayers to come under tax net.
He also regretted harsh fiscal measures on businesses in case of failure to collect documents from taxpayers which taxmen are supposed to do.
Responding to the discussants' points, Mr Kaikobad said though Bangladesh has no provisions of wealth taxes, but existing tax mechanism ensures higher tax collection from wealthy sections.
Mr Dhiman Kumar Chowdhury recommended a revenue board comprising majority of intellectuals and ensuring non-political representation.
He said the priority should be given on mobilisation of non-tax revenue too as it is extremely low in many sectors, citing example of the rates of government's Circuit House only Tk 100
BUILD CEO Ms Begum said there is no option but escalating ratio of direct tax collection.
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