More than half of the eligible individual taxpayers among professionals evade tax net, somehow, while Bangladesh's state exchequer suffers revenue shortages perennially.
Such a hiatus in the country's tax-collection system comes crystal clear from an initial estimate, based on government database. The National Board of Revenue (NBR) has found at least 10 million individuals from different professions eligible for submission of tax returns every year, but those pay are outnumbered by those who play truant.
It shows 4.6 million individuals submit tax returns while the number of registered taxpayers having taxpayer identification number (TIN) is 10 million.
Tax-return submission is mandatory for people having above Tk 350,000 in annual income. Taxpayers need to explain their annual income, assets and expenditures to the government in a bid to ensure transparency as per law if they have monthly income at Tk 30,000 or above.
The NBR detected professionals include lawmakers, high officials, lawyers, doctors, teachers, technicians, skill-based professions, and service providers.
Senior Secretary of the Internal Resources Division (IRD) under the Ministry of Finance (MoF) and National Board of Revenue (NBR) Chairman Abu Hena Md Rahmatul Muneem says the conservative estimate has been prepared on the basis of Bangladesh Bureau of Statistics (BBS) labour-force survey 2022, which may vary on a case-to-case basis.
The number of country's workforce eligible for payment of tax as well as tax-return submission has been estimated from among a total of 77 million people.
The NBR has done a nominal estimate on the primary profession, garment workers, motor-vehicle mechanics, producers of poultry and dairy products, he notes.
"In some cases, we found 100 per cent of the professionals eligible for tax payment such as lawmakers and high officials while 90 per cent of lawyers, doctors, teachers eligible for paying tax," he says.
The BBS data show the number of manager-category workforce 912,000 while professional-category workforce members 3,354,000.
In a recently prepared paper, the NBR has found 50 per cent of technicians eligible for return submission.
Some 75 per cent of clerks, 529,200 out of 882,000, are eligible for tax-return submission. Clerks include government-and private- sector officials.
From sales and marketing officers, the taxmen have identified 1,447,500 eligible taxpayers.
Some 10 per cent of the skilled agricultural, forest, and fisheries- sector workforces are eligible to be taxed.
The revenue board estimated 10 per cent of the skilled workers in garment and construction sectors, carpenter, painting, and motor mechanics as eligible.
Some 534,700 machine operators, 10 per cent out of 5,347,000, are eligible taxpayers while from primary professions it's 5.0 per cent.
Primary profession includes rickshaw-pullers, dock labourers, fast-food makers, hawkers and shoe polishers.
In the paper--a copy obtained by the FE correspondent--the NBR chief has shown a quantum jump in the number of tax returns in the last four years, from June 2020 to April 2024. Number of tax returns was 2.1 million in June 2020 that has increased to double 4.6 this year.
The NBR chairman hopes the number of tax returns would jump to 6.0 million shortly as the fiscal and tax measures such as mandatory submission of Proof of Submission of tax returns for availing 45 services would pay off.
He also says the NBR's outsourcing rule to appoint tax-return preparer (TRP) has been framed to bring the left-out taxpayers having taxable income onto the tax net through motivation.
"Taxpayers who haven't filed tax return yet would be able to submit their returns using electronic platform e-return with the help of TRP," he says.
Economist Prof Dr Mustafizur Rahman says the estimation of the number of taxpayers is based on "proxy indicator which shows eligible taxpayers among selective professionals".
However, the number of eligible people for payment of taxes would increase as there are some left-out sectors such as fast- growing agricultural sector which many well-off belong to, Dr Rahman, distinguished fellow of the Centre for Policy Dialogue (CPD), says to show how tax net could be cast wider.
"From the exhaustive analysis of NBR, we can get an idea on the number of eligible people for tax payment among the workforce in absence of rigorous exercise or taxpayer census," he adds.
However, some income-tax relief for the well-off is likely in the fiscal law, with the rate cut down to 25 per cent, as the Finance Bill 2024 is set to be passed by parliament today (Saturday).
The Finance Bill, which authorizes the government for appropriation from the national finances, was placed in the parliament on June 06, proposing, among others, the highest tax ceiling to be 30 per cent for individuals for the fiscal year 2024-25.
According to sources familiar with the matter, one of the key reasons for revising down the proposed tax is that many individual taxpayers would find themselves in a difficult situation to take their salary home for the month of June 2024 if the tax rate remains 30 per cent.
Besides, the government faced strong criticism from various quarters for keeping the provision in the proposed budget for FY'25 for legalising untaxed money by any individual with payment of tax at 15 per cent while raising the highest ceiling of income tax for individuals to 30 per cent.
"Such widespread criticisms might have prompted the government to consider reviewing its proposal for raising the maximum income-tax rate," says one of the sources about the last-minute change of heart.
Meanwhile, the Finance Bill 2024 was to be moved in the Jatiya Sangsad for passage on Thursday (June 27, 2024) but was deferred until June 29 (today).
The nearly Tk 8.0-trillion national budget is poised to get through the floor of parliament tomorrow (Sunday) to take effect next day.
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