The number of personal or individual-level income taxpayers in the country gives quite a disconcerting picture, notwithstanding the 'big bang' about annual tax fairs, the much-vaunted drives for expanding the direct tax net and the much ado about reorganisation, recast, reforms and extension of the offices of the tax-collecting authority in the past few years.
Individual tax-payers mean those who enjoy annual personal incomes above the tax-exempted limit -- that stands at Tk 0.22 million (2.20 lakh) for average citizens in the fiscal year (FY) 2014-15 -- and Tk 0.275 million (2.75 lakh) that has been raised from the previous fiscal's Tk 0.25 million (2.5 lakh) for the senior citizens (plus 65 years) and women.
The number of individual tax returns until November 20, 2014 stood at 0.6 million (6.0 lakh) -- the cut-off date from revised for the second time so far this year expires now on November 30, 2014. In last fiscal, the member of such returns was 1.00 million (10 lakh) last year.
But there are questions about this figure also, the sources in the National Board of Revenue (NBR) told the FE.
In the year, 2012-13, the number was 1.1 million (11 lakh), showing a declining trend.
Individual taxpayers account for less than 20 per cent of aggregate income tax receipts, the lion's part of which come from institutional sources (companies, corporate entities etc) and advance income tax (AIT) sources. The latter does not necessarily imply that those who are subject to AIT and hold tax identification numbers (TINs) submit their individual tax returns.
These figures speak themselves. Tax avoidance, non-compliance with the provisions of the relevant laws of the country, is the norm, not the exception in the country. Submission of income tax returns is mandatory for all those enjoying annual personal incomes above the exempted limit, without raising any question about quido pro quo to this effect. Tax avoidance is a punishable offence under the laws of the land, when such avoidance is detected.
Meanwhile, the country's gross domestic product (GDP) growth rate, according to official estimate, has been hovering at about 6.0 per cent on an annual average in past few years, showing a marked uptrend.
One notable aspect about individual tax-payers, according to the taxmen, is the number of such payers showing their amount of annual income in the highest tax-slab, carrying a rate of 30% now, as against 25% in the previous years.
Some 8000 of existing taxpayers have their annual income at above Tk 44,20,000 -- the highest tax slab, according to an estimate by the National Board of Revenue (NBR). Of them, some 5000 individuals, on the basis of records available with the NBR, have shown their annual income earnings at above Tk 20 million -- a level that now carries a surcharge of extra 10 per cent.
This, according to competent sources, is quite unbelievable, if one looks at the demonstration of 'riches,' individual life-styles, asset holdings (declared or undeclared) by a growing number of people in the wealthy class.
The Gini co-efficient -- a statistical measure to get some ideas about the income distribution -- does not justify the number of those who pay their individual taxes at the highest rate.
Gini co-efficient of Bangladesh was estimated by the World Bank (WB) at 0.458 in 2010. It was 0.467 in 2005 and 0.451 in 2000. No updated WB data is available.
The picture about more benefits of growth, coupled with incentives, going to the high income group in a disproportionate way with those among the low income ones, according to some competent experts, shows the extent of tax evasion. This is also a punishable offence under the income tax laws, the sources said.
There are 1.7 million TIN holders in the country. However, the number of tax returns, both individuals and institutional bodies including companies, businesses and private and public corporate entities, has been hovering between 1.0 million and 1.2 million in past three to four years. This situation indicates the low tax compliance and poor outcomes of tax awareness campaign as well as expansion of NBR offices throughout the period.
According to World Bank, the Gini index measures how the income or consumption expenditure is distributed among individuals or households within an economy, deviating from a perfectly equal distribution. Gini index of zero represents perfect equality, while an index of 100 implies perfect inequality.
Dr Ahsan H Mansur, Executive Director of the Policy Research Institute of Bangladesh (PRI), said the Gini co-efficient of Bangladesh does not show any major decline in income distribution of people in Bangladesh.
"There is no noticeable change in the figure. Income of all of the segments increased that should also include the lower segment of people in the tax bracket," he said.
However, the country is not seeing any big boost on the number of taxpayers while tax authority is taxing only existing taxpayers, he said.
About the new highest rate at 30 per cent for the taxpayers having individual income above Tk 44,20,000, Dr Mansur said the increase of the tax rate would lead to existing taxpayers becoming non-compliant and finding out ways to evade tax.
Dr Mansur termed the existing tax-free limit for individual taxpayers as 'quite generous' compared to the situation in other developed countries.
World Bank (WB) chief economist Dr Zahid Hussain, however, said income inequality increased slightly in Bangladesh with the growth of the country.
The lowest income segment of the country's population can reap less benefit on their increased income due to their lower scope on capacity to participate in the growth process, he added.
He cited examples of incentives given to the readymade garments sector, remittance earnings and agricultural sector enjoying the benefits of green revolution. All such incentives benefit the high-income groups of people more than the low-income ones.
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