Income tax return and wealth statement
Wednesday, 15 August 2007
Moazzem Hossain
AS the assessees start filing their individual tax returns for the current assessment year on the basis of their incomes during the last fiscal, 2006-07, it is important for all concerned to be candid and, thus, transparent about annual income and wealth statements. This transparency, in all frankness, has not been there in a larger number of cases of tax returns in our situation. In all fairness, most of us as tax-payers, irrespective of our amounts of payments, share the blame for it. It must also be stated that this situation has not been all because of any deliberate design. Rather, lack of proper awareness, too callous indifference on tax matters without understanding the consequences thereof, the general human tendency to hide incomes, though earned by honest means, for the purpose of not parting even a part of it, etc., have been the causes for this, in a situation where lax governance has been the norm, not the exception.
Had transparency been there, then income and wealth statements of all individual tax payers would have reflected the real situation concerning the same. Ideally or from strictly legal point of view, annual tax returns of all individual tax payers should portray the earnings and expenditures during the year under report, including the actual position of wealth or assets of such individuals at the close of that year. But such an 'ideal' situation has been missing in this country for a variety of factors that do hardly need any elaboration and realistically speaking, there are few countries in the world where an 'ideal' situation exists. Things may differ in relative terms from one country to another as far as tax compliance is concerned. Here Bangladesh has scored badly, leading to a situation where the discrepancy between what is shown about incomes, expenditures and accumulated wealth in individual tax returns and what the actual position thereof is, remains large and wide in too many cases.
If the picture would have been different from what has been noted above, then the demand for declaration of separate wealth statements by persons in responsible public positions would make no sense. This demand by itself is an admission of the discrepancy between wealth statements that are submitted to the tax authorities at the time of filing annual tax returns and the actual wealth (including income earning) under ownership or possession of relevant individuals. This has been the case with the assessees in general, barring few exceptions. The matter is different with those individuals who, despite having taxable income, file no tax returns.
Under taxation law, it is the bounden duty of the tax officials to maintain strict secrecy about income tax returns of individual tax payers until a case of tax evasion is framed against anyone on specific charges. As such, the tax administration under law is not expected to make public anything relating to tax returns by any individual assessee. Here, the relevant law may be amended for letting the members of the public know about the details of wealth of those holding responsible public offices under the Republic, if the situation warrants it for fostering the ideals of goods governance.
At this transitional stage in our national life, no responsible citizen would welcome the return of the status quo ante. All concerned would very much like to see that there is, from now on, no gross mismatch between what is stated in any individual tax payer's annual tax return and what is his or her actual wealth and income are. Efforts should, therefore, be made by all concerned to clean up the tax dossiers and to ensure transparency in tax returns.
Such efforts involve two sides -- individual tax payers, on one side, and tax administration, on the other. On their part, individual tax payers will, thus, require to comply with the provisions of the related income tax laws, in full appreciation of their implications as far as their incomes and wealth are concerned. The tax administration, on its part, does also need to encourage such tax payers, by appropriate policy supports and also by not too a rigid interpretation of law -- because the laws are also meant for creating the conditions to comply with the same matching the requirements and circumstances of the time -- for proper disclosures of all their wealth and income. There should be no fear among the tax payers at least on this count and the tax authorities will be required to dispel any such fear on the part of tax payers.
Having said that, it must also be noted that the relevant authorities of the government, particularly the Anti-Corruption Commission (ACC), will, of course, enjoy the right to assess whether what has been stated about wealth and income by any individual tax payer in his or her annual tax return and also whether the same -- wealth and income -- has been acquired and earned by honest means or not. Such authorities including the ACC should also have the right to frame charges against individuals whose wealth, both tangible and intangible ones, are found to run grossly afoul of his sources -- disclosed and undisclosed (but not corruption-ridden) -- of income and also to be in far excess of what has been declared under his or her income tax returns.
Here again, both the National Board of Revenue (NBR) and the ACC may go for concerted actions against those who have concealed their wealth, income or assets, after the reasonable scope has been given for the disclosures about the same. This 'concealment' does itself provide the ground for suspicion about the sources of such wealth or assets.
Meanwhile, the hard realities of life and the practicalities of the situation, as it prevails in the country, will call for some pragmatic approach on the part of both the ACC and the NBR to dealing with specific cases, considering the particular circumstances relating to an individual's income and wealth. There are many professional groups whose earnings of income by fair means have not been disclosed fully in their tax returns.
In this backdrop, the NBR has given the holders of undisclosed but not corruption-tainted income and wealth to declare and include the same in their annual tax returns on payment of the usual rate of tax plus five per cent penal charges. The time for disclosure of such incomes and assets has now been extended up to September 30, 2007. Those who had such undisclosed income in fiscal 2006-07 and the years before, can, thus, declare the same, taking the benefit of the facility.
Undisclosed income and wealth, earned or acquired not by foul means, is a cause for concern and anxiety for the holders of the same under the changed circumstances in the country, particularly in the context of the on-going drive for streamlining the tax regime. It is also an unsavoury situation for the tax administration for a crackdown on all individual tax assesses holding such undisclosed money and wealth, irrespective of the amounts and values thereof, will have severe unsettling effects.
On its part, the tax administration is now showing its teeth, taking hard actions against tax evaders or dodgers. The NBR has filed cases in courts of law against such evaders -- a course of action that it has not been earlier taken recourse to. This has caused worries among concerned sections of the people, irrespective of degrees of their tax dodging. The tax payers have their grievances, too, and, according to them, cases of large and small tax evaders should not be treated at par. That is a different issue that merits a separate review of the situation. For theoretical purposes, tax evasion, as all of us know it now the hard way, is an offence and, all offenders, irrespective of the scale of offence, may be prosecuted.
However, penalising, or, taking legal actions against, all categories of tax evaders whether they committed the offence by default or by design and also irrespective of amounts thereof, is certainly no pleasant job for the NBR. This is more so in a situation where such evasion has been going on since long under a system of lax governance. Harsh or punitive measures against all tax evaders, big or small, are also not palatable and can create panic which is not a healthy sign for any nation.
The amount of undisclosed money is not small in the economy. But attempts to quantify the same, in precise terms, are fraught with many risks. If only the cases of land or similar property-related transfers or transactions are taken into account, the amount will be quite substantial, given the circumstances under which the actual sale proceeds (from the sellers' side) and the real payments (from the buyers' side) are much higher than what the registered documents thereof would otherwise indicate.
The government has lately taken some steps to help reduce the difference between the actual transfer value of land and related property, and the registered value thereof, though many people consider that such steps in one-go may cause some adverse effects on the sale of property. Having noted this, it must be pointed out that the authorities concerned cannot afford to remain blind to the practicalities of the situation. Rather, they need to demonstrate a pragmatic approach to dealing with matters of payments and receipts relating to transactions concerning transfers of such immovable assets, that are shown in the income tax returns.
Now that the time has come for filing of tax returns for the new assessment year in the changed circumstances, the individual tax payers do need to be careful enough to avoid the pitfalls of the past and to become transparent, within the bounds of law, while filing their tax returns so that their income and wealth statements reflect the real situation. If this transparency is maintained, the same statements can become the reference point for all other concerned authorities. That is the ideal that everyone should strive to achieve. It is, however, easier said than done.
In this context, the NBR can be a facilitator in the process, by inducing and encouraging all tax payers to make proper disclosures of their incomes and wealth without any Democle's sword hung over them. Tax compliance on a voluntary basis -- the best way to curb tax evasion -- can be promoted in a situation where the tax authorities, in full appreciation of the ground-level realities, take appropriate steps to remove incongruities of the law, and to relax its unnecessary rigidities, as and where necessary, without compromising its basic spirit.
AS the assessees start filing their individual tax returns for the current assessment year on the basis of their incomes during the last fiscal, 2006-07, it is important for all concerned to be candid and, thus, transparent about annual income and wealth statements. This transparency, in all frankness, has not been there in a larger number of cases of tax returns in our situation. In all fairness, most of us as tax-payers, irrespective of our amounts of payments, share the blame for it. It must also be stated that this situation has not been all because of any deliberate design. Rather, lack of proper awareness, too callous indifference on tax matters without understanding the consequences thereof, the general human tendency to hide incomes, though earned by honest means, for the purpose of not parting even a part of it, etc., have been the causes for this, in a situation where lax governance has been the norm, not the exception.
Had transparency been there, then income and wealth statements of all individual tax payers would have reflected the real situation concerning the same. Ideally or from strictly legal point of view, annual tax returns of all individual tax payers should portray the earnings and expenditures during the year under report, including the actual position of wealth or assets of such individuals at the close of that year. But such an 'ideal' situation has been missing in this country for a variety of factors that do hardly need any elaboration and realistically speaking, there are few countries in the world where an 'ideal' situation exists. Things may differ in relative terms from one country to another as far as tax compliance is concerned. Here Bangladesh has scored badly, leading to a situation where the discrepancy between what is shown about incomes, expenditures and accumulated wealth in individual tax returns and what the actual position thereof is, remains large and wide in too many cases.
If the picture would have been different from what has been noted above, then the demand for declaration of separate wealth statements by persons in responsible public positions would make no sense. This demand by itself is an admission of the discrepancy between wealth statements that are submitted to the tax authorities at the time of filing annual tax returns and the actual wealth (including income earning) under ownership or possession of relevant individuals. This has been the case with the assessees in general, barring few exceptions. The matter is different with those individuals who, despite having taxable income, file no tax returns.
Under taxation law, it is the bounden duty of the tax officials to maintain strict secrecy about income tax returns of individual tax payers until a case of tax evasion is framed against anyone on specific charges. As such, the tax administration under law is not expected to make public anything relating to tax returns by any individual assessee. Here, the relevant law may be amended for letting the members of the public know about the details of wealth of those holding responsible public offices under the Republic, if the situation warrants it for fostering the ideals of goods governance.
At this transitional stage in our national life, no responsible citizen would welcome the return of the status quo ante. All concerned would very much like to see that there is, from now on, no gross mismatch between what is stated in any individual tax payer's annual tax return and what is his or her actual wealth and income are. Efforts should, therefore, be made by all concerned to clean up the tax dossiers and to ensure transparency in tax returns.
Such efforts involve two sides -- individual tax payers, on one side, and tax administration, on the other. On their part, individual tax payers will, thus, require to comply with the provisions of the related income tax laws, in full appreciation of their implications as far as their incomes and wealth are concerned. The tax administration, on its part, does also need to encourage such tax payers, by appropriate policy supports and also by not too a rigid interpretation of law -- because the laws are also meant for creating the conditions to comply with the same matching the requirements and circumstances of the time -- for proper disclosures of all their wealth and income. There should be no fear among the tax payers at least on this count and the tax authorities will be required to dispel any such fear on the part of tax payers.
Having said that, it must also be noted that the relevant authorities of the government, particularly the Anti-Corruption Commission (ACC), will, of course, enjoy the right to assess whether what has been stated about wealth and income by any individual tax payer in his or her annual tax return and also whether the same -- wealth and income -- has been acquired and earned by honest means or not. Such authorities including the ACC should also have the right to frame charges against individuals whose wealth, both tangible and intangible ones, are found to run grossly afoul of his sources -- disclosed and undisclosed (but not corruption-ridden) -- of income and also to be in far excess of what has been declared under his or her income tax returns.
Here again, both the National Board of Revenue (NBR) and the ACC may go for concerted actions against those who have concealed their wealth, income or assets, after the reasonable scope has been given for the disclosures about the same. This 'concealment' does itself provide the ground for suspicion about the sources of such wealth or assets.
Meanwhile, the hard realities of life and the practicalities of the situation, as it prevails in the country, will call for some pragmatic approach on the part of both the ACC and the NBR to dealing with specific cases, considering the particular circumstances relating to an individual's income and wealth. There are many professional groups whose earnings of income by fair means have not been disclosed fully in their tax returns.
In this backdrop, the NBR has given the holders of undisclosed but not corruption-tainted income and wealth to declare and include the same in their annual tax returns on payment of the usual rate of tax plus five per cent penal charges. The time for disclosure of such incomes and assets has now been extended up to September 30, 2007. Those who had such undisclosed income in fiscal 2006-07 and the years before, can, thus, declare the same, taking the benefit of the facility.
Undisclosed income and wealth, earned or acquired not by foul means, is a cause for concern and anxiety for the holders of the same under the changed circumstances in the country, particularly in the context of the on-going drive for streamlining the tax regime. It is also an unsavoury situation for the tax administration for a crackdown on all individual tax assesses holding such undisclosed money and wealth, irrespective of the amounts and values thereof, will have severe unsettling effects.
On its part, the tax administration is now showing its teeth, taking hard actions against tax evaders or dodgers. The NBR has filed cases in courts of law against such evaders -- a course of action that it has not been earlier taken recourse to. This has caused worries among concerned sections of the people, irrespective of degrees of their tax dodging. The tax payers have their grievances, too, and, according to them, cases of large and small tax evaders should not be treated at par. That is a different issue that merits a separate review of the situation. For theoretical purposes, tax evasion, as all of us know it now the hard way, is an offence and, all offenders, irrespective of the scale of offence, may be prosecuted.
However, penalising, or, taking legal actions against, all categories of tax evaders whether they committed the offence by default or by design and also irrespective of amounts thereof, is certainly no pleasant job for the NBR. This is more so in a situation where such evasion has been going on since long under a system of lax governance. Harsh or punitive measures against all tax evaders, big or small, are also not palatable and can create panic which is not a healthy sign for any nation.
The amount of undisclosed money is not small in the economy. But attempts to quantify the same, in precise terms, are fraught with many risks. If only the cases of land or similar property-related transfers or transactions are taken into account, the amount will be quite substantial, given the circumstances under which the actual sale proceeds (from the sellers' side) and the real payments (from the buyers' side) are much higher than what the registered documents thereof would otherwise indicate.
The government has lately taken some steps to help reduce the difference between the actual transfer value of land and related property, and the registered value thereof, though many people consider that such steps in one-go may cause some adverse effects on the sale of property. Having noted this, it must be pointed out that the authorities concerned cannot afford to remain blind to the practicalities of the situation. Rather, they need to demonstrate a pragmatic approach to dealing with matters of payments and receipts relating to transactions concerning transfers of such immovable assets, that are shown in the income tax returns.
Now that the time has come for filing of tax returns for the new assessment year in the changed circumstances, the individual tax payers do need to be careful enough to avoid the pitfalls of the past and to become transparent, within the bounds of law, while filing their tax returns so that their income and wealth statements reflect the real situation. If this transparency is maintained, the same statements can become the reference point for all other concerned authorities. That is the ideal that everyone should strive to achieve. It is, however, easier said than done.
In this context, the NBR can be a facilitator in the process, by inducing and encouraging all tax payers to make proper disclosures of their incomes and wealth without any Democle's sword hung over them. Tax compliance on a voluntary basis -- the best way to curb tax evasion -- can be promoted in a situation where the tax authorities, in full appreciation of the ground-level realities, take appropriate steps to remove incongruities of the law, and to relax its unnecessary rigidities, as and where necessary, without compromising its basic spirit.