The Finance Minister's acquiescence with a long-standing demand from businesses to address the issue of tax on tax and double taxation is both interesting and welcome. There have been years of dithering on the issue that was and is clearly wrong. It was one of those conveniently overlooked in the frenzied rush for revenue, almost at any cost. It was also another excuse not to expand the tax-net either due to inability, lack of will or political expediency. Businesses moaned and groaned but had no option but to live with it. Individuals did their complaining in the confines of their opinion.
The most sophisticated system will have loopholes. Systems loss, in days prior to the pre-paid era, hasn't been erased from memory yet. Value added tax (VAT), even in advanced countries hasn't reached zero-leakage state. Ironically, it is support for small business that has forced a bending of rules in those countries. Electronic cash registers too haven't been embraced by trade all over. Nor has shortage in revenue collections led to increasing taxation on those already taxed. Admittedly most of this double taxation hits the same group.
Trade bodies have this as one of the copy-paste demands on their wish-list. Each year it gets worse and the merry-go-round continues. The difference between more advanced countries and Bangladesh is in the 'double' bit not being as ludicrous. VAT on government fees is as bad a lacuna as is an advance income tax that is adjusted almost a year later, depending on whether other tax-deduction amounts reach threshold levels. When that happens there's taxation again.
In a way, it is surprising that the tax on tax issue isn't challenged in court. Although courts essentially incline to the government on revenue matters, dire unfairness is often acted on.
Electronic cash registers have been slow to gain popularity and there have been many complaints about hand-written VAT receipts that have the calculations wrong. And whether gratuities are part or excluded from VAT is anyone's debate. Maintaining documentation is a new hassle that has replaced the decades-old official complications in tax returns. Random audits of tax files that have written clearance given to, increase complexity putting further pressure on the citizens who do and want to clear their taxes. That their submissions were made to someone in authority doesn't feature as an issue .The frequency with which income tax (IT) submissions are being required before transactions, even in applications for visas, begs a rudimentary question, how is income tax evaded after so many checks and balances.
In a largely cash transacted economy, the challenges are significant both of revenue collection and of payments. The taxman does at times live in an eerie world that doesn't resemble reality. With the tax income ratio in shambles, it's a wonder any balancing of the revenue books make sense. In the meantime, ambitious targets continue to be set and missed.
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