Raising tax revenue

The upcoming national budget is set to give a mighty thrust on collections of direct tax revenues and value added tax (VAT), as media reports suggest. With the gradual shift in revenue collection world over — prompted by massive trade liberalisation — the key source of government revenues today ceases to be customs duties. It is thus the incomes of individuals and business houses that constitute the main source of government receipts, and rightly so given the economic rationale. The target of income tax revenue collection for the next fiscal year will reportedly be set at Tk. 600 billion, which is 35 per cent higher than the current year's revised level. It has furthermore been reported that around 38 per cent of the projected aggregate tax receipts of the National Board of Revenue (NBR) in the upcoming national budget will come from income tax, while the share of VAT (Value Added Tax) and customs duties will be 35 per cent and 27 per cent respectably. This clearly shows that the lion's share of receipts in government revenues will be met from income tax source.  
In preparing for an aggressive tax collection drive, the authorities, as the available indications suggest, are planning to mainly focus on the tax-dodging affluent sections of society. The wealthy sections of society here, as elsewhere, are habitual tax evaders. Efforts to unearth their assets for the purpose of tax assessment are indeed welcome. The NBR is also reportedly contemplating on imposing surcharge on wealth for realising more tax from the rich. The existing slabs for levying of surcharges, as the available indicators suggest, may be raised. Changes may likewise be brought in the system of asset valuation so that higher taxes could be collected from the rich.
In this context, it remains to be said that the country's existing tax structure is still urban-centric, and as a result, a large number of people, mostly small traders and property owners who are otherwise eligible to pay taxes, are not under NBR's tax scanner. Echoing this spirit, the NBR Chairman mentioned the other day that a huge potential in revenue earnings, mostly from income tax, was still untapped due to lack of proper focus. This understandably calls for recasting the modus operandi of tax collection as a whole. The parliamentary standing committee on the ministry of finance has reportedly advised the government to form a high-powered technical committee or a national taskforce that would recommend ways to bring more people under the tax net.
While lauding the move to bring rich tax dodgers into the tax net, one feels that there is a critical need to expand the tax net to bring in more people who are eligible to pay taxes.  This, no doubt, will require a cautious approach. Given the prevailing practice of tax collection in the country, it is important to bring a change in the mindset of the common people. Widening the tax net will then be found rewarding in realising higher revenues as well as ushering in a culture of taxation where taxpayers from a wide array of social segments - big or small - will participate.