Hullabaloos over undisclosed money
Shamsul Huq Zahid | Monday, 16 June 2008
Trade bodies, if not the National Board of Revenue, this time appear to be unusually enthusiastic about the government's offer to formalise undisclosed yet legal income.
The Federation of Bangladesh Chambers of Commerce and Industry-FBCCI, has demanded of the government to allow formalisation of legally earned money without any penal tax if the same is invested in industries. Similar demand came from the Dhaka Chamber of Commerce and Industry (DCCI) and the Dhaka Stock Exchange (DSE). The association of realtors has urged the government to allow penal tax-free formalisation of undeclared legal income if it is invested in real estates.
Finance Adviser Dr. Mirza Azizul Islam in the national budget for the fiscal 2008-09 offered yet another opportunity to formalise undeclared yet lawfully earned money by paying a penal tax of 7.0 per cent in addition to normal tax. The offer will remain valid between July and October, 2008. The government offered similar opportunity in the last fiscal with a 5.0 per cent penal tax.
Actually, in the income tax law, there has been a permanent provision for the formalisation of undeclared legal income. But problem with that provision is that the income tax officials, under the same provision, have the discretionary power to fix the penal tax between 'zero' per cent and 500 per cent.
In the national budget for 2008-09, a proposal has been made to fix penal rate at 10 per cent for formalising undisclosed income detected by taxmen. But what if anyone wants to disclose voluntarily his or her untaxed legal earning? There should be some form of incentive for this type of disclosure. However, the government has done a good job by fixing a fair rate of 10 per cent penalty for the formalisation of undisclosed income detected by the taxmen.
But how far are the noises made by the trade bodies over formalisation of undeclared legal income relevant to the real situation? Do the large taxpayers really avail themselves of the opportunities offered by the government to regularize their tax payment?
The taxmen are convinced that large taxpayers are not that interested to exploit such opportunities and come out clean. The opportunity offered by the NBR in the last fiscal to formalise undeclared legal income by paying a 5.0 per cent penal tax amidst a sort of panic triggered by the caretaker government's anti-graft drive, actually, had no effect on the large taxpayers. That is why the opportunity offered by the government failed to bring in a substantial part of the undeclared legal income under the tax net. Only Tk. 52.13 billion worth of undisclosed lawful income was legalised and the government's earning from such disclosures stood at Tk. 8.02 billion.
The NBR being aware of the ground realities has estimated the additional revenue from the same facility at only Tk 3.0 billion in the next fiscal. The Board should consider itself lucky if it can hit that target since the situation in the coming months may not be that favourable for earning extra revenue. This time the 'fear' factor is unlikely to influence the minds of the taxpayers.
To be honest, the multinationals and the white collar wage earners do comply with tax requirements far better than others. Most commercial and industrial establishments, big and small, have a built-in tendency to evade tax. A section of audit firms, tax lawyers and tax officials are prone to extending their helping hand to firms willing to evade tax.
However, such tax evasion is nothing unique in case of Bangladesh. It does happen even in the most developed and the wealthiest country in the world. But the difference lies in the intensity and cases of tax evasion. In Bangladesh, incidences of tax evasion are galore and it is difficult to get even one single individual fully clean as far as tax-compliance is concerned. An old system of tax collection managed and overseen by officials, some of whom are thought to be corrupt, cannot deliver anything better.
But because of the insistence of the donors and the thrust on anti-tax evasion drive since the takeover of the present caretaker administration, the attitude of the taxpayers has undergone some noticeable change. The government of the day deserves appreciation for that. However, much would depend on the performance of the next elected government, which is expected to take over the rein of the administration in January next. If the government remains serious about better tax-compliance, it should create an environment where people feel encouraged to pay their taxes in right amount.
The collection of revenue on account of income tax during the outing fiscal has surpassed the target. Such a development does take place in this country very rarely. Only once in the country's 37-year old history, the target set for income tax earning was surpassed marginally. The reason behind this achievement, many tend to believe, has been the fear created in the minds of the taxpayers by the anti-graft and anti-tax evasion drives against the big shots by the army-backed caretaker administration.
Sceptics say that the situation with income tax would return to the previous state under a political government. But optimists do not subscribe to such views. They have a feeling that the anti-graft and anti-tax evasion drives would leave a lasting effect on the society in general and politicians and businessmen in particular. And this would result in better tax compliance in future. But demonstration of such positive attitude on the part of taxpayers would largely depend on the efficiency and sincerity of the country's tax administration.
[email protected]
The Federation of Bangladesh Chambers of Commerce and Industry-FBCCI, has demanded of the government to allow formalisation of legally earned money without any penal tax if the same is invested in industries. Similar demand came from the Dhaka Chamber of Commerce and Industry (DCCI) and the Dhaka Stock Exchange (DSE). The association of realtors has urged the government to allow penal tax-free formalisation of undeclared legal income if it is invested in real estates.
Finance Adviser Dr. Mirza Azizul Islam in the national budget for the fiscal 2008-09 offered yet another opportunity to formalise undeclared yet lawfully earned money by paying a penal tax of 7.0 per cent in addition to normal tax. The offer will remain valid between July and October, 2008. The government offered similar opportunity in the last fiscal with a 5.0 per cent penal tax.
Actually, in the income tax law, there has been a permanent provision for the formalisation of undeclared legal income. But problem with that provision is that the income tax officials, under the same provision, have the discretionary power to fix the penal tax between 'zero' per cent and 500 per cent.
In the national budget for 2008-09, a proposal has been made to fix penal rate at 10 per cent for formalising undisclosed income detected by taxmen. But what if anyone wants to disclose voluntarily his or her untaxed legal earning? There should be some form of incentive for this type of disclosure. However, the government has done a good job by fixing a fair rate of 10 per cent penalty for the formalisation of undisclosed income detected by the taxmen.
But how far are the noises made by the trade bodies over formalisation of undeclared legal income relevant to the real situation? Do the large taxpayers really avail themselves of the opportunities offered by the government to regularize their tax payment?
The taxmen are convinced that large taxpayers are not that interested to exploit such opportunities and come out clean. The opportunity offered by the NBR in the last fiscal to formalise undeclared legal income by paying a 5.0 per cent penal tax amidst a sort of panic triggered by the caretaker government's anti-graft drive, actually, had no effect on the large taxpayers. That is why the opportunity offered by the government failed to bring in a substantial part of the undeclared legal income under the tax net. Only Tk. 52.13 billion worth of undisclosed lawful income was legalised and the government's earning from such disclosures stood at Tk. 8.02 billion.
The NBR being aware of the ground realities has estimated the additional revenue from the same facility at only Tk 3.0 billion in the next fiscal. The Board should consider itself lucky if it can hit that target since the situation in the coming months may not be that favourable for earning extra revenue. This time the 'fear' factor is unlikely to influence the minds of the taxpayers.
To be honest, the multinationals and the white collar wage earners do comply with tax requirements far better than others. Most commercial and industrial establishments, big and small, have a built-in tendency to evade tax. A section of audit firms, tax lawyers and tax officials are prone to extending their helping hand to firms willing to evade tax.
However, such tax evasion is nothing unique in case of Bangladesh. It does happen even in the most developed and the wealthiest country in the world. But the difference lies in the intensity and cases of tax evasion. In Bangladesh, incidences of tax evasion are galore and it is difficult to get even one single individual fully clean as far as tax-compliance is concerned. An old system of tax collection managed and overseen by officials, some of whom are thought to be corrupt, cannot deliver anything better.
But because of the insistence of the donors and the thrust on anti-tax evasion drive since the takeover of the present caretaker administration, the attitude of the taxpayers has undergone some noticeable change. The government of the day deserves appreciation for that. However, much would depend on the performance of the next elected government, which is expected to take over the rein of the administration in January next. If the government remains serious about better tax-compliance, it should create an environment where people feel encouraged to pay their taxes in right amount.
The collection of revenue on account of income tax during the outing fiscal has surpassed the target. Such a development does take place in this country very rarely. Only once in the country's 37-year old history, the target set for income tax earning was surpassed marginally. The reason behind this achievement, many tend to believe, has been the fear created in the minds of the taxpayers by the anti-graft and anti-tax evasion drives against the big shots by the army-backed caretaker administration.
Sceptics say that the situation with income tax would return to the previous state under a political government. But optimists do not subscribe to such views. They have a feeling that the anti-graft and anti-tax evasion drives would leave a lasting effect on the society in general and politicians and businessmen in particular. And this would result in better tax compliance in future. But demonstration of such positive attitude on the part of taxpayers would largely depend on the efficiency and sincerity of the country's tax administration.
[email protected]