About making tax collection drive a success
Humayun Kabir | Monday, 25 August 2008
NEWSPAPER reports have recently indicated that the government is about to launch a hunt to find out more taxpayers. Ideally, there can be no objection to this. The total number of taxpayers in Bangladesh are much lower compared to other countries and, therefore, the government can expect to increase revenue collection from such a drive. This is more so in a situation where only 0.5 million to 0.6 million individuals or institutions file their tax returns regularly, notwithstanding the fact, according to the estimates by the National Board of Revenue (NBR), that there are 10 million income-earners in the country who are required, under the provisions of the Income Tax Act, to file their tax returns. Such people do not have, in most cases, tax identification numbers (TINs) and remain outside the tax net.
In many cases, a good number of existing TIN holders, provisional or otherwise, who had to procure such 'numbers' for the sake of circumstantial needs or structural demands, do not have any known or regular source of annual income. In such a context, the NBR should rather aim more at bringing the potential tax-payers, not having TIN, within the tax network. Meanwhile, while launching such a drive, the authorities concerned should also take a pragmatic approach to the issue, particularly in view of the current slowed-down state of the economy.
It does not require a pundit to understand that a government needs resources to take up various projects and programmes in the social and developmental sectors. The resources in large measures are supposed to be mobilised as taxes given by people and organisations. But as everyone concerned probably knows it in Bangladesh, the taxes collected by the government in different areas are pitiably low compared to the potential. But citizens also have points to raise about government not spending their tax money as efficiently as it should or the hardships it may create on sections of people from the move to extend the net for taxation.
Nonetheless, the fact remains that the base of taxation remains rather narrow and enlargement of it is very important. This will be justified to augment tax collection. More significantly, the augmentation requires revamping, modernisation and reforms of the tax administration. Plans should be on the drawing board and their execution need to be early to modernise the entire tax administration. The same is necessary for the obvious reasons of securing revenue collection on a long lasting basis. But the expected upgradation of the taxation machinery and the contemplated actions to expand the taxation base, are yet not seen, though these measures would be vital for the government to maintain the high level of its desired spending in various social and developmental programmes.
But before engaging in any reforms in taxation, it appears very necessary that people or institutions should be made aware of the need to pay taxes. There are many people and businesses who are able to pay taxes but do not pay or pay in proportion as they feel no guilt associated with non-payment or insufficient payment of taxes. Furthermore, the present system has deliberately kept many gaps to facilitate tax evasion. The culture is rather ascendant that tax evasion is the smarter or appropriate thing to do than its opposite. A truly informative and persuasive campaign should precede any hard move to against the existing tax-payers with strong evidence about their substantial tax evasion or purposefully increase the number of new taxpayers. In this context, the people should also be convinced, first of all, of the merit of paying taxes and they would also require some assurance that their tax money would be well spent. That will create a congenial environment for motivating them to pay dues taxes.
The efficiency of the taxation machinery depends considerably on retraining the taxmen on modern lines. They can be trained in countries where the tax administrations are efficient. But there should be also recognition that without a substantial follow-up revamping of organisations, procedures and methods of administration, much of the training would be wasted. Specially, the tax administration needs to acquire real capacity in the intelligence and enforcement areas.
Besides, there has to be realisation also that stepped-up activities to collect more taxes can prove to be successful in a setting where new investment operations are taking place in the economy, the established enterprises are running well or the general health of the economy is a sound one. In such a situation of accelerated economic activities leading to wealth and income creation, taxmen may not have difficulty in finding taxable enterprises or individuals. Individuals and organisations in such a setting are also found more cooperative or willing to pay taxes from their having adequate resources to do so.
But if the opposite situation prevails, then the hardline approach to tax collection may have adverse knock-on effects on the economy. There is no denying here that some vital indicators about the health of the Bangladesh economy show now some negative trends. The economy is currently in a slowdown mood. How can then there be expectation to collect more taxes in this scenario? People can, of course, be arm-twisted into paying more taxes. But that would otherwise mean a form of repression. Under such circumstances, it would be only prudent for the government to, first of all, adopt policies that would restore the confidence of businesses and help sustain the same, leading to the invigoration of the economy. Collecting more taxes then would not prove to be either an oppressive exercise or face lack of cooperation from the potential taxpayers.
In many cases, a good number of existing TIN holders, provisional or otherwise, who had to procure such 'numbers' for the sake of circumstantial needs or structural demands, do not have any known or regular source of annual income. In such a context, the NBR should rather aim more at bringing the potential tax-payers, not having TIN, within the tax network. Meanwhile, while launching such a drive, the authorities concerned should also take a pragmatic approach to the issue, particularly in view of the current slowed-down state of the economy.
It does not require a pundit to understand that a government needs resources to take up various projects and programmes in the social and developmental sectors. The resources in large measures are supposed to be mobilised as taxes given by people and organisations. But as everyone concerned probably knows it in Bangladesh, the taxes collected by the government in different areas are pitiably low compared to the potential. But citizens also have points to raise about government not spending their tax money as efficiently as it should or the hardships it may create on sections of people from the move to extend the net for taxation.
Nonetheless, the fact remains that the base of taxation remains rather narrow and enlargement of it is very important. This will be justified to augment tax collection. More significantly, the augmentation requires revamping, modernisation and reforms of the tax administration. Plans should be on the drawing board and their execution need to be early to modernise the entire tax administration. The same is necessary for the obvious reasons of securing revenue collection on a long lasting basis. But the expected upgradation of the taxation machinery and the contemplated actions to expand the taxation base, are yet not seen, though these measures would be vital for the government to maintain the high level of its desired spending in various social and developmental programmes.
But before engaging in any reforms in taxation, it appears very necessary that people or institutions should be made aware of the need to pay taxes. There are many people and businesses who are able to pay taxes but do not pay or pay in proportion as they feel no guilt associated with non-payment or insufficient payment of taxes. Furthermore, the present system has deliberately kept many gaps to facilitate tax evasion. The culture is rather ascendant that tax evasion is the smarter or appropriate thing to do than its opposite. A truly informative and persuasive campaign should precede any hard move to against the existing tax-payers with strong evidence about their substantial tax evasion or purposefully increase the number of new taxpayers. In this context, the people should also be convinced, first of all, of the merit of paying taxes and they would also require some assurance that their tax money would be well spent. That will create a congenial environment for motivating them to pay dues taxes.
The efficiency of the taxation machinery depends considerably on retraining the taxmen on modern lines. They can be trained in countries where the tax administrations are efficient. But there should be also recognition that without a substantial follow-up revamping of organisations, procedures and methods of administration, much of the training would be wasted. Specially, the tax administration needs to acquire real capacity in the intelligence and enforcement areas.
Besides, there has to be realisation also that stepped-up activities to collect more taxes can prove to be successful in a setting where new investment operations are taking place in the economy, the established enterprises are running well or the general health of the economy is a sound one. In such a situation of accelerated economic activities leading to wealth and income creation, taxmen may not have difficulty in finding taxable enterprises or individuals. Individuals and organisations in such a setting are also found more cooperative or willing to pay taxes from their having adequate resources to do so.
But if the opposite situation prevails, then the hardline approach to tax collection may have adverse knock-on effects on the economy. There is no denying here that some vital indicators about the health of the Bangladesh economy show now some negative trends. The economy is currently in a slowdown mood. How can then there be expectation to collect more taxes in this scenario? People can, of course, be arm-twisted into paying more taxes. But that would otherwise mean a form of repression. Under such circumstances, it would be only prudent for the government to, first of all, adopt policies that would restore the confidence of businesses and help sustain the same, leading to the invigoration of the economy. Collecting more taxes then would not prove to be either an oppressive exercise or face lack of cooperation from the potential taxpayers.