Spreading the tax net horizontally

President of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) Kazi Akram Uddin Ahmed has urged the National Board of Revenue (NBR) to take steps to spread the tax-net horizontally, even to rural areas, thereby reducing the pressure  on the urban tax-payers. Recently The Financial Express arranged a pre-budget dialogue titled 'Revenue Maximisation Opportunities'.  Renowned economists, research scholars and business leaders took part in the dialogue. The discussants were unanimous in their opinion that the government, instead of hiking the tax rate, should broaden the net since there is an enormous potential to do so.
One of the speakers said the tax policy should be pro-business, pro-growth and pro- export. This is a very ideal comment but it is traditional and bookish. Nobody would say that the tax policy should be anti-business, anti- growth and anti-export. Anyway nobody would disagree with the view that the taxi policy should be broad-based and more and more people should be brought under the tax-net. There is no reason to think that only a small number of tax payers should be squeezed.
A senior research fellow of the BIDS (Bangladesh Institute of Development  Studies) said that Bangladesh lacks enough research activities in areas of taxation. "In the  absence of  proper research, we  don`t know the actual tax potential of Bangladesh nor do we know the extent  of tax evasion," he said.  He further said none still knows what should be the ideal tool for raising taxes. Should it be tax base or rate? So, much stress should be laid to carrying out research and survey work for finding new areas to be brought under the tax-net.
Meanwhile, certain issues need to be discussed. Normally, an existing taxpayer should not be put under pressure. But the syndrome of concentration of wealth in the hands of a few cannot be overlooked. In fact, it has become a global phenomenon. Rich/poor divide has been sharp and alarming.
Some developing countries as well as stern protagonists of free market economy are thinking of levying  some kind of tax identifying  a section of wealthy persons as super rich people.  In our country, too, we should find out such 'super rich' people in our context.  
Globally, corporate social responsibility (CSR) activities have been rapidly increasing. Some countries have made it compulsory for  companies to carry out CSR activities within the ambit of the company law. In Bangladesh, the central bank (Bangladesh Bank) has very rightly goaded the commercial banks into the fold of the CSR activities. But companies of other sectors are still enjoying the free ride. CSR activities are supplementing  development activities.
Pilferage in tax collection is also a major problem. In this connection, the issue of general insurance may be taken up for discussion. In general insurance business, the rate of unauthorised and illegal    commission on premium is very high. It could not be stopped in spite of a number of the government orders/instructions/and circulars and apparent assurances  from the Bangladesh Insurance  Association (B.I.A). VAT income from the  sector would have been double if the loopholes  could be plugged.
The FBCCI president suggested to explore rural areas to find out new taxpayers. But how much the opportunities are available in rural areas for accumulating capital, in other words, wealth?  Industries are sometimes set up in remote areas, but the capital is controlled from its urban headquarters. All services like banks, insurance, tourism and road transports are operated and controlled from the cities. However, some centres of textiles industries, mostly in the form of weaving, are located in rural areas. Still agriculture is the mainstay of the people in rural areas.  Of course,  there has been tremendous improvement in the agriculture sector. A large number of farmers now earn money which probably exceeds the taxable amount. But in taking any decision about levying tax on these people, the sustainability of income needs to be carefully examined. Vegetable cultivators are very much worth paying taxes at the moment. But what had happened during the last two years? In  2013, vegetable growers incurred huge losses due to blockade. The administration could not provide minimum security to them. There is also no storage facility. As a result, most of the farm products were damaged and destroyed. According to the report of Incidin Bangladesh, an organisation dealing with development issues, the broad agriculture sector incurred losses worth Tk 300 billion due to the political turmoil that has been continuing since January 2015. Farmers do not have any effective organisation like trade unions. As a result, their voice is low and lost and does not reach the  policymakers.
On the other hand, nobody compels the investors to go to the stock market. Some of them may invest out of their own will. Still the Ministry of Finance has come up with financial compensation package because of trade union-like  activities  and movement of urban investors. Capital market forum has been set up with a view to invigorating the dwindling  share market. Share market gurus know it very well that a stock exchange is buoyant only if the economy of the country attains similar buoyancy. The reverse never happens anywhere in the globe. Unless Bangladesh gets rid of the political turmoil, there is no chance of any sustainable recovery of the share market. However, still we welcome the forum. The Association of Bankers has also joined the forum.
Any way, the tax authorities should explore rural. But they should follow a different policy for the prospective rural taxpayers. For example, in rewarding the taxpayers or selecting CIPs (commercially important persons) from among them, the yardstick should be different from the one used for urban areas.  The reasons are understandable and no explanation is required.
rezaulparvaz@live.com