Building confidence in the tax admin
Thursday, 8 November 2007
The National Board of Revenue (NBR) has lately taken some welcome steps towards restoring the confidence of the business community. Such steps have come in the changed situation where measures have been taken to ensure compliance of the taxpayers through evolving a more client-friendly tax administration. The other day leading bankers at a joint meeting with the Bangladesh Bank, the NBR and the National Savings Directorate had proposed to the new NBR chairman that the tax authorities should seek access to bank account of an individual on a case to case basis by following a set of procedures. In line with this proposal, they suggested that the NBR might first issue a notice to a person it suspects of having concealed information about his wealth. But if the individual in question fails or refuses to provide the asked for information, the NBR may then go for the option of accessing the position of her or his wealth either from banks or from non-banking financial institutions.
The NBR chief in that meeting allayed fears and misgivings of those who invested in savings certificates, by reassuring all those concerned that the advanced income tax on their interest-related income up to Tk 150,000 that was earlier deducted at source, would be returned to the investors. In a similar fashion, to restore business confidence, it was also assured that the problems relating to frozen bank accounts would be resolved for the sake of allowing the suspected or convicted account holders to run their businesses. The NBR, it was further reported, would from now on be exercising restraint while asking for details of accounts of the clients of the banks, while not letting up its efforts to deal with the suspected tax-dodgers in accordance with the laws of the land.
Such moves on the part of the NBR would certainly be considered right steps to improve the overall business climate. The NBR should act upon them sooner than later in order to keep the wheels of the economy moving at an accelerated pace. As far as tax compliance is concerned, the whole exercise should not also be looked upon as the sole obligation of the government and its department. On their part, the tax payers, both actual and potential, do also need to extend their cooperation, by way of being tax-compliant, to the efforts of the government to help plug in tax evasion.
Meanwhile, the present tax culture deserves a deeper look than it is receiving at the moment. The number of actual tax payers is still too low for a country of about 150 million people. Even compared to many least developed economies in this region and elsewhere, the situation, particularly relating to coverage under direct tax net, is in no way encouraging in Bangladesh. Here, the problem lies in the culture and mindset of the population. The common perception is that the tax collectors belong to the same breed of government agencies as the law enforcers and as such are instruments of coercion. What is more, many people, who are taxable, are yet to be made aware of the fact that by paying tax they can also enhance their status as citizens and may make rightful claim to various kinds of state resources and entitlements.
The above is an issue of educating the people about the uses of tax. So, to make people more tax-oriented, a massive awareness campaign through the media as well as the various social and cultural forums have to be undertaken. For that matter, persuasion rather than coercion should be considered a pragmatic course of action for encouraging tax compliance. Punitive measures should be applied where deliberate "mischief" is found to be involved in cases of those who have earnings well above the tax exemption limit but do not wilfully pay the taxes. While taking such measures, the revenue officials do need to be more proactive, efficient and persuasive, not certainly coercive, in order to ensure tax compliance. Then, the overall revenue administration will be considered cooperative with tax payers, while applying the tax laws judiciously without compromising its basic principles and norms for promoting the values of good governance.
The NBR chief in that meeting allayed fears and misgivings of those who invested in savings certificates, by reassuring all those concerned that the advanced income tax on their interest-related income up to Tk 150,000 that was earlier deducted at source, would be returned to the investors. In a similar fashion, to restore business confidence, it was also assured that the problems relating to frozen bank accounts would be resolved for the sake of allowing the suspected or convicted account holders to run their businesses. The NBR, it was further reported, would from now on be exercising restraint while asking for details of accounts of the clients of the banks, while not letting up its efforts to deal with the suspected tax-dodgers in accordance with the laws of the land.
Such moves on the part of the NBR would certainly be considered right steps to improve the overall business climate. The NBR should act upon them sooner than later in order to keep the wheels of the economy moving at an accelerated pace. As far as tax compliance is concerned, the whole exercise should not also be looked upon as the sole obligation of the government and its department. On their part, the tax payers, both actual and potential, do also need to extend their cooperation, by way of being tax-compliant, to the efforts of the government to help plug in tax evasion.
Meanwhile, the present tax culture deserves a deeper look than it is receiving at the moment. The number of actual tax payers is still too low for a country of about 150 million people. Even compared to many least developed economies in this region and elsewhere, the situation, particularly relating to coverage under direct tax net, is in no way encouraging in Bangladesh. Here, the problem lies in the culture and mindset of the population. The common perception is that the tax collectors belong to the same breed of government agencies as the law enforcers and as such are instruments of coercion. What is more, many people, who are taxable, are yet to be made aware of the fact that by paying tax they can also enhance their status as citizens and may make rightful claim to various kinds of state resources and entitlements.
The above is an issue of educating the people about the uses of tax. So, to make people more tax-oriented, a massive awareness campaign through the media as well as the various social and cultural forums have to be undertaken. For that matter, persuasion rather than coercion should be considered a pragmatic course of action for encouraging tax compliance. Punitive measures should be applied where deliberate "mischief" is found to be involved in cases of those who have earnings well above the tax exemption limit but do not wilfully pay the taxes. While taking such measures, the revenue officials do need to be more proactive, efficient and persuasive, not certainly coercive, in order to ensure tax compliance. Then, the overall revenue administration will be considered cooperative with tax payers, while applying the tax laws judiciously without compromising its basic principles and norms for promoting the values of good governance.