A regressive direct-tax measure discourages many who missed deadlines in previous years from submitting returns for fear of bloated tax liability as a punishment for noncompliance, be it intentional or unintentional.
Many taxpayers, both corporate and individual, have said they would not be able to file returns with huge taxes, often over 500 times in some cases.
Taxmen have not allowed any tax exemption, rebate or waiver since 01 July 2023, citing the provisions of a new law that experts term deficient on taxing large number of people staying outside tax net but efficient in hiking tax burdens on existing taxpayers.
Therefore, those who became defaulter unintentionally for reasons like sickness, financial crisis, and unavailability in the country or suchlike are now in panic after the sudden imposition of heavy penalty.
However, new taxpayers can submit tax returns without any penalty until 30 June 2024, as per an extra timeline.
A number of field-level tax officials have acknowledged the complexities stemming from the new tax measure for delinquent filers and sought clarification of this from high-ups.
However, a top tax official of the National Board of Revenue (NBR) said there was confusion among field offices over the provision.
"The income-tax wing of the NBR might issue clarification in this regard, if needed," he added.
He said the tax law of the particular year would be applicable to the taxpayers who want to submit tax return of that year.
Talking to the FE, many field-level taxmen said they had no other option but to impose heavy taxes on delinquents for no instructions or clarification from the NBR in this regard.
Any NBR clarification might help them consider provisions of the previous tax law, the Income Tax Ordinance-1984, for the delinquents, they said.
They have also found the tax measure too harsh that may limit the inclusion of taxpayers under the tax net.
Some delinquent large taxpayers came to the taxman with two or three years' returns and expressed their inability to pay a huge amount of taxes.
"I have to sell either my property or become bankrupt if I want to submit last year's tax return now by paying heavy taxes," said Rahim Sheikh (not his real name), who could not submit tax returns for financial crunch in business as well as ailment in FY 2022-23.
"I found no way but to lodge a writ petition with the High Court to challenge the tax demand raised by the taxman," he told the FE.
Tax experts have also found the imposition of such hefty penal tax not a wise decision in view of the existing poor tax base.
Currently, only 0.2 per cent of the country's population submits tax returns while registered taxpayers are 5.29 per cent.
There is a vast scope to expand the tax net through adopting effective measures rather than discouraging taxpayers from submitting tax return with such provisions.
Penalty for non-compliance is a welcome move if it is imposed gradually and increased in phases with an awareness campaign to bring taxpayers under it.
The new income-tax law, effective from 22 June 2023, has imposed the tax measure under which any of the taxpayers failing to submit tax returns in time would not be entitled to any tax benefit, waiver or exemption.
Under the law, a taxpayer having income above Tk 350,000 enjoys exemptions on one-third of their total income on account of housing, medical and other expenditure purposes.
Also, the taxmen allow tax benefit on income derived from fisheries, poultry, ICT and allied sectors.
However, the tax benefits would not be applicable for the taxpayers who would submit tax returns after deadline.
The timeframe for individuals on submission of tax returns for the current fiscal is 30 November 2023.
With the measure, taxmen would count taxes on entire income of a taxpayer, having taxable income above Tk 350,000, without allowing any tax exemptions.
Rabiya Haque, a middle-aged lady who came from Italy after two years, said her payable taxes bloated to Tk 5.0 million from Tk 10,000 as taxmen are not allowing tax-exempted income on her investment in savings instruments.
She found it impossible to pay and submit tax returns under the existing tax measure.
A field-level tax official has said as per existing law, any returnee from abroad would have to submit tax returns within three months of their arrival back in Bangladesh to avoid the penalty.
Responding to a query of this correspondent, he said Ms Rabiya could avoid the heavy penal tax if she remained aware of the tax laws of the country.
He, however, acknowledges that the measure has been driving away many potential taxpayers from submitting tax returns.
Tax experts say the NBR had no such campaign or public-awareness programme to let taxpayers be informed on the tax measures last year that they would have to face such penalty for missing deadline.
Still, a large population having taxable income remains out of tax net who may not be willing to submit returns if the NBR does not consider making it reasonable.
Taxmen also said such penalty should be imposed after giving a timeframe with warning on its implications after expiry.
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