An International Monetary Fund (IMF) mission begins reappraisal of Bangladesh's tax-expenditure status on direct taxes, tax incentives to businesses and compliance issues through consultation with the revenue authority.
In a series of meetings scheduled for March 4-15, geared towards necessary reforms, the National Board of Revenue (NBR) would present before the lender's tax-policy mission a list of short- and medium-term priorities to increase direct tax receipts, sources said.
According to an agendum of the NBR, both the entities would discuss what aspects of the income tax are working well, what the challenges behind revenue mobilization are, and how income tax is viewed in relation to business competitiveness.
Mission representatives from the Washington-based multilateral financier David Baar David Wentworth and Arbind would sit with the NBR income-tax members, first secretaries, second secretaries, and tax- expenditure team.
On the first day (Monday), the NBR would provide an update on income-tax-expenditure reporting and its impact so far noted.
Tax officials say IMF-mission visits play a vital role as its terms on credit support are linked to domestic revenue mobilisation, too.
The Fund has set a target for increase in the country's tax-to-GDP ratio by 0.5 per cent this fiscal year from the existing 7.9 per cent.
Earlier, the NBR has prepared a primary study of TE as per recommendation of the IMF where it has identified that expenditure ate up 3.56 per cent of country's GDP in FY 2020-21.
During the latest meeting, income-tax incentives would also come up for a rigorous scrutiny as to how the government views income-tax incentives, what essential mechanisms are to encourage business investment versus rationalizing support through a more neutral approach to encourage growth, what the view of Bangladesh is on income taxation and the promotion of social objectives.
"They would discuss legislative approach to find out whether all tax incentives included in the income-tax act or other government entities or ministries modify income-tax rules and provide relief," says one official.
The mission -- meant for promoting reforms set forth in the US$4.7-billion-loan package -- would discuss whether businesses availing tax holiday are filing tax returns or if the NBR verifies the information furnished in their tax returns.
Both online tax return and manual submission would be reviewed in the meetings to know its coverage so far.
The IMF team would give a presentation on microsimulation modeling, tax-expenditure assessment and evaluations.
Meeting over, the mission would give its primary findings and seek feedback from the tax authority in what is seen as a rigorous process of resetting financial affairs as they think fit.
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