Ensuring greater tax compliance

THE propensity to evade tax is almost universal. However, the incidence of tax evasion in the developed countries is not that high because of the strict monitoring by the agencies concerned and the actions against evaders, irrespective of their social status, influence and power. Tax evasion in those countries is considered a gross crime and individuals and organisations found helping someone to evade tax are also subjected to punishment. However, the scenario is different in most developing countries where the rate of tax evasion varies from high to very high, mainly because of lax enforcement of punitive provisions of the relevant laws against tax evaders. Bangladesh is among the countries where the rate of tax evasion is abnormally high, notwithstanding the fact the situation has improved to some extent in recent years. The direct tax income figures of the last five to six financial years would substantiate such a claim. Still, thousands of individuals and organisations who are eligible to pay tax have remained beyond the tax net and many existing taxpayers do not pay the right amount of tax, taking advantage of the loopholes in the tax laws or hiding facts from tax officials. It is not that private individuals or organisations are the only ones prone to tax evasion. Even government agencies are often found to indulge in such irregularity. According to a report published in this paper last Monday, at least, four state-owned enterprises, including the petroleum marketing behemoth the Bangladesh Petroleum Corporation (BPC), owes Tk 5.0 billion (500 crore) to the National Board of Revenue (NBR) in arrear income tax. The revenue authority considers the failure to pay tax by the government-owned entities as a bad precedent that would encourage the private sector people to be less tax-complaint. However, there could be some valid arguments on the part of one or two SoEs that have defaulted on tax payment to the NBR. For instance, the BPC owes Tk. 1.46 billion to the NBR in arrear advance income tax (AIT), collected at the import stage of petroleum products. Perennially, the BPC is a loss-incurring entity because of the gross mismatch between the costs of procurement of petroleum products and the selling prices of the same. It is heavily dependent on government subsidies for its sustenance. In fact, the government pays several times more as subsidy to the BPC than what it receives as tax from the oil marketing corporation. Thus, to save the BPC, which enjoys monopoly in fuel import, from embarrassment, the government might consider waiving the AIT in its case, because of its inability for a variety of factors to ensure reflection of actual costs of products in the pricing of petroleum products. In fact, the rate of tax compliance largely depends on strict adherence to rules, regulations by all concerned, including the taxmen. Any discrimination or over-indulgence or undue exercise of authority by tax officials does leave a demoralizing effect on the honest taxpayers who are though not many in their numbers. Getting the people or organisations to pay taxes in right amount and in right time is, no doubt, a difficult job and it would be too much to expect results from the taxmen within a short time. Yet they can achieve wonders through the exercise of fair judgment and demonstration of honesty and sincerity while realising the tax at the rate that are set under the country's fiscal regime at any given point of time.