Income tax receipts not in tandem with rising TINs

The growth in income tax collection has not been consistent with the rise in the number of TIN (taxpayers' identification number) holders, raising concerns among the experts at a seminar on Saturday.
They suggested modernisation of the outdated tax laws and systems as well as bringing qualitative changes in the taxpayers so that they become willing to pay tax.
According to a gross estimation-based analysis presented at the seminar, the average collection per registered taxpayer dropped to Tk112,975 in Financial Year (FY) 2021 from that of Tk143,942 in FY 2019.
The number of TIN holders jumped to 7.4 million in 2021 from 4.3 million in 2019, it added.
Chartered Accountant Snehasish Barua, a member of the Institute of Chartered Accountants of Bangladesh (ICAB), has presented the paper at the seminar titled "100 Years of Income Tax Law of Bangladesh - Expectations and Achievements", hosted by International Business Forum of Bangladesh (IBFB) in the city.
Planning Minister M.A Mannan attended the seminar as chief guest.
Mr Barua, a partner of Snehasish Mahmud & Co, said that in qualitative terms, the taxpayers were not contributing much despite their increase in numbers.
He also presented a detailed picture on how the source tax or withholding tax was contributing the major portion in income tax collection.
More than 94 per cent of the income tax comes from different forms of source taxes every year while the income tax wing of the National Board of Revenue (NBR) collects 5.0-8.0 per cent apart from the source taxes, the paper said.
He said the higher incidence of source taxes increases the effective tax rates on businesses despite the cuts in corporate tax rates every year, said Mr Barua, citing examples from his paper.
If the actual business income of a company is Tk150 million, it becomes Tk 233 million to trade off the impact of the source tax, according to the paper.
He said Bangladesh holds one of the lowest positions in tax return submission compared to that of the other neighbouring countries.
He put forward a set of recommendations including integration of the income tax, VAT and customs wings, automation of statutory bodies, and integrated internal system.
Mr Barua also suggested lowering tax deducted at source, investing in capacity building of the tax officials, rationalisation of tax exemption, simplifying the laws, and expansion of tax offices in the growth centres.
"Tax should be imposed on the people having higher income to lower the inequality," he added.
The speakers at the seminar underscored the need for simplifying tax laws and acts.
Addressing the seminar, the planning minister said tax payment is a holy duty of the people for the welfare of the state.
"We need reform … dialogue and discussions can help solve the state-related problems," he said, adding that a wide range of discussion on reforming the outdated tax laws is a demand of time.
With a view to increasing the taxpayers, the wall between the NBR and the taxpayers should be destroyed, he said.
Mr Mannan also said that the tax exemption practice should be abolished right now for the greater interest of the country. "Why is the tax exemption practice on the rise in the country? It's totally unknown to me," he noted.
Legal economist and adviser to the Bangladesh Competition Commission (BCC) MS Siddiqui said Bangladesh is still practicing injustice in terms of tax affairs while the collection method has not improved that much.
In absence of dynamism in the tax laws, he added that it has become impossible to increase the tax to GDP ratio.
Former NBR chairman Dr. Muhammad Abdul Mazid said the economy will experience no discrimination if prudential tax law is introduced. "We've to be responsible for paying tax to ensure the well being of the state," he added.
IBFB president and Managing Director & CEO of Energypac Power Generation Ltd. Humayun Rashid was present at the seminar as the chairperson.
Among others A.F. Hassan Ariff, former attorney general & former advisor of the caretaker government, Hafizur Rahman Khan, immediate past president of IBFB, and Lutfunnisa Saudia Khan, vice president (finance) of IBFB, former income tax member Md Alamgir Hossain, and Bangladesh Reconditioned Vehicles Importers and Dealers Association (BARVIDA) president Abdul Haque also spoke at the event.
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