Reforming tax revenue administration
Wednesday, 24 November 2010
That the country's tax revenue administration needs a thorough reform is an undisputable fact. Government, donors and other stakeholders have time and again discussed the reform issue. But for one reason or another, the much-needed reform continues to delude everyone concerned, depriving the government of a substantial amount of revenue every year and subjecting the taxpayers to unnecessary harassment. There were, however, initiatives in the past to streamline the tax administration-albeit in a piecemeal way, that has failed to deliver any tangible results.
There is no denying that revenue earnings from value added tax (VAT) and income tax have been on a steady rise in recent years. This is, however, not true in the case of import duty for reasons of lower import of some items and downward revision of duty on a good number of essential commodities. But it is widely believed-there are strong reasons for that - that tax revenue earnings remain far below the actual potential because of a host of factors, including inefficiency, deep-rooted corruption and procedural and legal lacunas. Such bottlenecks have largely been responsible for poor coverage of potential taxpayers and large-scale tax evasion by a section of existing taxpayers.
However, of late, a new reform initiative is underway to reform all the wings of the National Board of Revenue (NBR) by the courtesy of the Bangladesh Investment Climate Fund (BICF) which is managed by the International Finance Corporation (IFC), a subsidiary of the World Bank (WB). The BICF, according to report published in this daily early this week, has prepared a draft work plan relating to reform of customs, VAT and income tax wings and sent the same to the NBR for review. The work plan that is proposed to be implemented over a period of three years (2010-2013) includes five themes on reform, including reviewing of income tax, VAT and customs laws and rules, strengthening of institutional capacity, automation of services, capacity building, monitoring and evaluation.
The NBR has reportedly sent the work plan to all commissionerates seeking opinion of field level officials. Since field officials do play a key role in tax revenue generation, seeking of their opinion seems to be a move in the right direction. However, the government should not be oblivious of the fact that resistance to reforms comes from within. The beneficiaries of a lax tax administration might try to torpedo the reform initiative from the very beginning. So, success of the BICF-sponsored initiative would largely depend on the level of seriousness on the part of the government. If the government means business and is bent upon carrying out the much-needed reform, only then there could be some tangible and positive results for both the government and the taxpayers.
In this context, it would not be, however, out of place to point out the need for having opinion from the taxpayers, particularly the businesses, on the BICF work plan. The NBR should organise a few discussion meetings with stakeholders other than its own officials which, in all likelihood, would help it make a better review of the plan. The major trade bodies could make some positive contributions in this direction. In fact, funds for reforming the tax administration would never be a problem. The reform has always tended to take the backseat for lack of sincerity on the part of the people in-charge of implementing the same and certainly not for reasons of paucity of fund. This time, hopefully, there would be a marked departure from past practices.
There is no denying that revenue earnings from value added tax (VAT) and income tax have been on a steady rise in recent years. This is, however, not true in the case of import duty for reasons of lower import of some items and downward revision of duty on a good number of essential commodities. But it is widely believed-there are strong reasons for that - that tax revenue earnings remain far below the actual potential because of a host of factors, including inefficiency, deep-rooted corruption and procedural and legal lacunas. Such bottlenecks have largely been responsible for poor coverage of potential taxpayers and large-scale tax evasion by a section of existing taxpayers.
However, of late, a new reform initiative is underway to reform all the wings of the National Board of Revenue (NBR) by the courtesy of the Bangladesh Investment Climate Fund (BICF) which is managed by the International Finance Corporation (IFC), a subsidiary of the World Bank (WB). The BICF, according to report published in this daily early this week, has prepared a draft work plan relating to reform of customs, VAT and income tax wings and sent the same to the NBR for review. The work plan that is proposed to be implemented over a period of three years (2010-2013) includes five themes on reform, including reviewing of income tax, VAT and customs laws and rules, strengthening of institutional capacity, automation of services, capacity building, monitoring and evaluation.
The NBR has reportedly sent the work plan to all commissionerates seeking opinion of field level officials. Since field officials do play a key role in tax revenue generation, seeking of their opinion seems to be a move in the right direction. However, the government should not be oblivious of the fact that resistance to reforms comes from within. The beneficiaries of a lax tax administration might try to torpedo the reform initiative from the very beginning. So, success of the BICF-sponsored initiative would largely depend on the level of seriousness on the part of the government. If the government means business and is bent upon carrying out the much-needed reform, only then there could be some tangible and positive results for both the government and the taxpayers.
In this context, it would not be, however, out of place to point out the need for having opinion from the taxpayers, particularly the businesses, on the BICF work plan. The NBR should organise a few discussion meetings with stakeholders other than its own officials which, in all likelihood, would help it make a better review of the plan. The major trade bodies could make some positive contributions in this direction. In fact, funds for reforming the tax administration would never be a problem. The reform has always tended to take the backseat for lack of sincerity on the part of the people in-charge of implementing the same and certainly not for reasons of paucity of fund. This time, hopefully, there would be a marked departure from past practices.