Making tax payment people's friendly
Monday, 3 December 2007
Shamsul Huq Zahid
The new chairman of the National Board of Revenue Muhammad Abdul Mazid could have guessed that there would be lot of complaints from the businesspeople. But the enormity of the complaints overwhelmed him when he met with the leaders of the country's apex trade body, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) in Dhaka late last week.
Pointing to a number of coercive fiscal measures and unfriendly attitude of taxmen, the businesses alleged that they had got a feeling that the authorities were meting out punishment to the people concerned for committing a crime by setting up industrial units. In this context they cited the hike in duty on the captive power plants when severe power shortage was seriously affecting production in mills and factories. An exporter accused the NBR men of destroying packets containing export goods in the name of checking. Other allegations included whims of tax officials, unrealistic imposition of value added tax and refusal on the part of taxmen to attend even genuine grievances of the businesses in the name of 'emergency rule'.
Local and international studies have found the cost of doing business in Bangladesh very high. The businesses often do have to spend more than the justified amount to get things done at government offices, ports and other places. Things might have eased a bit under the present caretaker administration but irregularities are still there. A trader or an industrialist actually does not make excess payment to government offices or at the port from his or her own pocket. The amount paid in excess of the regular amount of duty and tax is passed on to the poor consumers. However, high profit-motive among a section of businessmen does also contribute to the hike in the prices of most items, essential or otherwise.
Allegations against tax officials are galore. Most people, rightly or wrongly, do not hold the taxmen, as is the case with the police, in high esteem. It is very difficult to say that everyone employed in these departments is a corrupt individual. At every place there are both good and bad people. But the very lifestyle of even petty officials or employees of the taxation departments has forced most people to assume that tax officials are corrupt and hence they can afford to spend beyond their means. To be honest, those who blame the tax officials for being dishonest, in many cases, themselves deserve the censure of similar nature since just to pay less than what is due, they do often pay bribes to taxmen. It has rather been a symbiotic relationship.
Some people tend to believe that failure to evade duty and taxes these days at the import stage is responsible for hike in prices of most imported commodities, including the essential ones. They argue that many traders earlier used to import goods and commodities in excess of the quantities shown in the letters of credit and got the same released without paying the due duty and taxes by bribing customs officials at the land and sea ports. The average cost of imported goods, thus, used to be less because of the duty evasion. But because of the tough monitoring by the joint forces, such irregular practices have come down remarkably in recent months. That is a positive development. But actions against corruption and duty evasion have been taking a toll on the consumers who are paying more for imported goods. This is a real life dilemma.
The common allegation against tax officials has been that honest importers or individual taxpayers are subjected to unnecessary harassment by the tax officials. And the existing tax laws and regulations have helped the tax officials develop a sort tyrant-like attitude towards the taxpayers. In the recent past, attempts have been made to cut the discretionary power of tax officials. But the situation has not changed much on the ground.
In spite of the recent actions against tax evasion, there has not been much change in the attitude of the general taxpayers. The number of individual tax returns submitted until last Thursday demonstrates that fact. The mobilisation of income tax revenue is expected to be more than that of the last year but the number tax returns would be, disappointedly, less than expected. It seems that the taxpayers who used to pay less tax than the due would be paying the actual or the near-actual amount of tax this time. The number of new taxpayers is unlikely to be that big.
The multilateral lenders for sometime have been pressing the government hard to bring about necessary reform in the tax administration to make it transparent and effective. The government has taken a few piecemeal efforts in that direction. But the old tax administration has remained in tact and the people are truly scared of it.
Moreover, a citizen feels the urgency of paying tax when he or she sees that his or her money is well spent so that the state would come in aid of its citizens when they are in distress. But is the situation that ideal in Bangladesh?
Take the case of road tax of nearly Tk. 5000, which is non-NBR revenue, paid by a car owner every year. But what is the every day experience of a motor vehicle owner on the streets of Dhaka city?
A taxpayer can expect the minimum level of attention and facilities at the public hospitals and other institutions. But can he or she expect that? People are not supposed to pay tax at the end of the year to sustain a large and inefficient bureaucracy that has little sympathy for the people's cause or support loss-making state-owned enterprises or allow the corrupt politicians to pocket a sizeable part of it.
The people would feel encouraged to pay taxes if the system of tax payment is easy, the tax rates are not burdensome and the tax revenue is well-spent. The government, it seems, will have to go a long way in ensuring all those pre-requisites. It may take years to create such a positive environment under a well-designed programme for tax reforms.
The new chairman of the National Board of Revenue Muhammad Abdul Mazid could have guessed that there would be lot of complaints from the businesspeople. But the enormity of the complaints overwhelmed him when he met with the leaders of the country's apex trade body, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) in Dhaka late last week.
Pointing to a number of coercive fiscal measures and unfriendly attitude of taxmen, the businesses alleged that they had got a feeling that the authorities were meting out punishment to the people concerned for committing a crime by setting up industrial units. In this context they cited the hike in duty on the captive power plants when severe power shortage was seriously affecting production in mills and factories. An exporter accused the NBR men of destroying packets containing export goods in the name of checking. Other allegations included whims of tax officials, unrealistic imposition of value added tax and refusal on the part of taxmen to attend even genuine grievances of the businesses in the name of 'emergency rule'.
Local and international studies have found the cost of doing business in Bangladesh very high. The businesses often do have to spend more than the justified amount to get things done at government offices, ports and other places. Things might have eased a bit under the present caretaker administration but irregularities are still there. A trader or an industrialist actually does not make excess payment to government offices or at the port from his or her own pocket. The amount paid in excess of the regular amount of duty and tax is passed on to the poor consumers. However, high profit-motive among a section of businessmen does also contribute to the hike in the prices of most items, essential or otherwise.
Allegations against tax officials are galore. Most people, rightly or wrongly, do not hold the taxmen, as is the case with the police, in high esteem. It is very difficult to say that everyone employed in these departments is a corrupt individual. At every place there are both good and bad people. But the very lifestyle of even petty officials or employees of the taxation departments has forced most people to assume that tax officials are corrupt and hence they can afford to spend beyond their means. To be honest, those who blame the tax officials for being dishonest, in many cases, themselves deserve the censure of similar nature since just to pay less than what is due, they do often pay bribes to taxmen. It has rather been a symbiotic relationship.
Some people tend to believe that failure to evade duty and taxes these days at the import stage is responsible for hike in prices of most imported commodities, including the essential ones. They argue that many traders earlier used to import goods and commodities in excess of the quantities shown in the letters of credit and got the same released without paying the due duty and taxes by bribing customs officials at the land and sea ports. The average cost of imported goods, thus, used to be less because of the duty evasion. But because of the tough monitoring by the joint forces, such irregular practices have come down remarkably in recent months. That is a positive development. But actions against corruption and duty evasion have been taking a toll on the consumers who are paying more for imported goods. This is a real life dilemma.
The common allegation against tax officials has been that honest importers or individual taxpayers are subjected to unnecessary harassment by the tax officials. And the existing tax laws and regulations have helped the tax officials develop a sort tyrant-like attitude towards the taxpayers. In the recent past, attempts have been made to cut the discretionary power of tax officials. But the situation has not changed much on the ground.
In spite of the recent actions against tax evasion, there has not been much change in the attitude of the general taxpayers. The number of individual tax returns submitted until last Thursday demonstrates that fact. The mobilisation of income tax revenue is expected to be more than that of the last year but the number tax returns would be, disappointedly, less than expected. It seems that the taxpayers who used to pay less tax than the due would be paying the actual or the near-actual amount of tax this time. The number of new taxpayers is unlikely to be that big.
The multilateral lenders for sometime have been pressing the government hard to bring about necessary reform in the tax administration to make it transparent and effective. The government has taken a few piecemeal efforts in that direction. But the old tax administration has remained in tact and the people are truly scared of it.
Moreover, a citizen feels the urgency of paying tax when he or she sees that his or her money is well spent so that the state would come in aid of its citizens when they are in distress. But is the situation that ideal in Bangladesh?
Take the case of road tax of nearly Tk. 5000, which is non-NBR revenue, paid by a car owner every year. But what is the every day experience of a motor vehicle owner on the streets of Dhaka city?
A taxpayer can expect the minimum level of attention and facilities at the public hospitals and other institutions. But can he or she expect that? People are not supposed to pay tax at the end of the year to sustain a large and inefficient bureaucracy that has little sympathy for the people's cause or support loss-making state-owned enterprises or allow the corrupt politicians to pocket a sizeable part of it.
The people would feel encouraged to pay taxes if the system of tax payment is easy, the tax rates are not burdensome and the tax revenue is well-spent. The government, it seems, will have to go a long way in ensuring all those pre-requisites. It may take years to create such a positive environment under a well-designed programme for tax reforms.