Gap between tax revenue and potential very large
Sunday, 22 May 2011
FE Report
A significant part of the economy remains untaxed, posing a threat to public financing and much-needed investment in the country's rickety infrastructure, officials said Saturday. Revenue officials making a retreat outside Dhaka to devise ways to boost government revenue income said the gap between revenue collected and potential in the cases of customs and value added tax is 30 and 80 per cent respectively, while it is infinite as far as income tax is concerned. "We are not getting tax as per our expectation," said member of National Board of Revenue M Fariduddin, who heads the board's customs and VAT administrations. "There is no study on what amount of tax should we collect and what is the potentiality. But whatever estimates we have they show that the country's tax-gap is huge," he said. He said tax authority has launched a raft of new moves to widen tax net and explore the untapped revenue potentials in customs duties, VAT and income tax earnings. "If we can collect tax to its full potential, we won't have to worry about fiscal deficit or financing the growing funding needs in energy and infrastructure," said another official. Fariduddin said the revenue board has moved to conduct study on the country's new taxable areas and formulate new policies to fix the problems affecting revenue collection. NBR Chairman Dr. Nasiruddin Ahmed said his board is grossly understaffed, making it difficult to collect taxes in accordance to the government's annual target. He said the board has taken an array of projects to build capacity of the regional tax offices and strengthen its central office. Ahmed and other senior tax officials were speaking at the retreat in Gazipur, just two and a half weeks before the finance minister places the budget for the next fiscal year in the national parliament. The NBR arranged a workshop on tax administration modernization at the BRAC CDM centre at Rajendrapur of Gazipur with the support of Bangladesh Investment Climate Fund (BICF). NBR chairman said the board will set up a tax zone at Gazipur within a short time. Fariduddin said the NBR is also building up institutional capacity to ensure exchange of information among its different wings. "Three wings of the revenue board are not exchanging information with each other, causing problems in tax collections," he said. Dr. Ahmed said the NBR will introduce a single identity where TIN (taxpayers' identification number) and BIN (Business Identification number) will be merged. All types of transaction and taxable income will be traced easily with the unified ID system, he added. "The government's revenue reform project will be complete by 2015 with an aim to achieve annual internal revenue target of Tk 2.0 trillion," he said. In the sixth five-year plan continuing through 2015, the government has set a target to more than double the size of the economy to Tk 15 trillion from the current Tk 7.0 trillion, he said. M Masrur Reaz, programme manager of BICF advisory services in South Asia, said efficiency in revenue administration is a must to boost tax income. Modernization of tax department will ensure efficiency in taxation with the help of new ICT tools, he said, adding: "We are hopeful of finding a solution by next September."
A significant part of the economy remains untaxed, posing a threat to public financing and much-needed investment in the country's rickety infrastructure, officials said Saturday. Revenue officials making a retreat outside Dhaka to devise ways to boost government revenue income said the gap between revenue collected and potential in the cases of customs and value added tax is 30 and 80 per cent respectively, while it is infinite as far as income tax is concerned. "We are not getting tax as per our expectation," said member of National Board of Revenue M Fariduddin, who heads the board's customs and VAT administrations. "There is no study on what amount of tax should we collect and what is the potentiality. But whatever estimates we have they show that the country's tax-gap is huge," he said. He said tax authority has launched a raft of new moves to widen tax net and explore the untapped revenue potentials in customs duties, VAT and income tax earnings. "If we can collect tax to its full potential, we won't have to worry about fiscal deficit or financing the growing funding needs in energy and infrastructure," said another official. Fariduddin said the revenue board has moved to conduct study on the country's new taxable areas and formulate new policies to fix the problems affecting revenue collection. NBR Chairman Dr. Nasiruddin Ahmed said his board is grossly understaffed, making it difficult to collect taxes in accordance to the government's annual target. He said the board has taken an array of projects to build capacity of the regional tax offices and strengthen its central office. Ahmed and other senior tax officials were speaking at the retreat in Gazipur, just two and a half weeks before the finance minister places the budget for the next fiscal year in the national parliament. The NBR arranged a workshop on tax administration modernization at the BRAC CDM centre at Rajendrapur of Gazipur with the support of Bangladesh Investment Climate Fund (BICF). NBR chairman said the board will set up a tax zone at Gazipur within a short time. Fariduddin said the NBR is also building up institutional capacity to ensure exchange of information among its different wings. "Three wings of the revenue board are not exchanging information with each other, causing problems in tax collections," he said. Dr. Ahmed said the NBR will introduce a single identity where TIN (taxpayers' identification number) and BIN (Business Identification number) will be merged. All types of transaction and taxable income will be traced easily with the unified ID system, he added. "The government's revenue reform project will be complete by 2015 with an aim to achieve annual internal revenue target of Tk 2.0 trillion," he said. In the sixth five-year plan continuing through 2015, the government has set a target to more than double the size of the economy to Tk 15 trillion from the current Tk 7.0 trillion, he said. M Masrur Reaz, programme manager of BICF advisory services in South Asia, said efficiency in revenue administration is a must to boost tax income. Modernization of tax department will ensure efficiency in taxation with the help of new ICT tools, he said, adding: "We are hopeful of finding a solution by next September."