Taming the unresponsive tax-dodgers
Friday, 31 October 2008
Syed Fattahhul Alim
The government has used both hard and soft tactics to make those having undeclared source of income avail themselves of the opportunity to legalise their earning. Seeing that the response was rather encouraging last fiscal (2007-08) as some 42,459 people did turn up to legalise their incomes with the payment of 5 per cent penal tax in addition to normal tax, the NBR continued the provision of legalising undisclosed income even for the current fiscal. However, unlike in the last financial year when the revenue collection procedure for the possessors of undisclosed income was stricter and 'scare tactics' was used by the NBR to prompt them to disclose their entire income and whiten it through paying the usual as well as penal tax, this time the collection procedure has been made further lenient. However, in the previous fiscal, the rate of penal tax was less by two per cent than that of this year (seven per cent). And last year, the tax collection drive helped the National Board of Revenue (NBR) to collect a significant sum of money amounting Tk 8.02 billion.
Surprisingly though, the turn out of the targeted group of taxpayers was poor this fiscal in spite of the fact that the collection method used by the NBR this year was more relaxed.
Obviously, the revenue board has been a bit disappointed, for only about 2,000 people appeared to whiten their hidden income, which amounted to a mere Tk 1.50 billion. The government collected some Tk 200 million from that amount of declared hidden income this fiscal. The question that is pestering the NBR people is: was it right to be so persuasive and soft towards those erring citizens, who have broken the law of the land by keeping their earning secret from the government and thereby depriving it of the revenue due to them? And now that they are showing the arrogance of disregarding the NBR's offer, is it not the time to again come down hard on them?
Some even suggested the option of harder policing to compel the owners of undisclosed income to respect their offer and seize the opportunity.
Should they now return to the old tactics to discipline this recalcitrant group of taxpayers, as they are simply ignoring the gesture of goodwill from the NBR?
To be fair, the revenue officials have their legitimate reasons for getting upset at this poor turn out of the intended group of citizens possessing undisclosed sources of income.
A few questions arise here as regards this strange behaviour on the part of the particular group of citizens in question. Has the poor response this time been due solely to softer tactics used by NBR as a collection policy so rued by some officials of NBR? Or are there also other factors that have prompted that group of potential source of revenue for the government to shy away?
In fact, changing a particular policy out of any exasperation, since the softer NBR policy did not come up with the expected result as expected is not certainly an ideal approach to tackle the issue. For after only one trial one cannot hope to get the best result from a new policy or method introduced by the implementers of the policy concerned.
True, the revenue department has to be tough on the tax-dodgers to ensure their compliance with the tax laws of any country in the world. Even in the neighbouring India, the government is unforgiving towards the tax-evaders. The law is unsparing even towards the celebrities. Why should it then be otherwise in Bangladesh?
The argument is undoubtedly unassailable. But there is a catch here. Unlike other countries where the tax culture is well-established and the tax people apply the law without fear or favour, the environment in Bangladesh has its own specialty. The habit that paying tax is the duty of a citizen is yet to penetrate the popular consciousness. One cannot put the blame entirely on the taxable citizens for this apathy towards paying tax. If truth be told, the tax people need also to take some responsibility for the general aversion of the people towards paying tax. In fact, the system of collecting tax has to be made modern through introduction of latest tools and technology for the purpose.
The procedure of tax submission has to be made more user-friendly. At the same time, there should be helpline for the users so that they may fill in the forms on their own learning the chore as they are doing it. The tax people, though they may have to be tough towards the breakers of the tax laws, have also to keep in mind that they are not the ones with the big stick and always in pursuit of, as it were, the run-of-the-mill delinquents. Because, in the ultimate analysis their job is to increase the revenue earning of the people and meet the annual target of revenue collection. So, it is a far harder task than that of the normal law-enforcers. And as such, they need to develop a special kind of knowledge, skill and attitude.
As was told in the foregoing, Bangladesh is quite a different kettle of fish so far as the tax culture is concerned. The reason is that wealth is considered here as something very private. The act of peering into it by any outsider, questioning the owner about its source and the way it is being spent are looked upon as a kind of trespassing into one's private space. What is more, an uninitiated, but potential taxpayer may have the fear that he or she might be inviting unforeseen risk by laying bare his or her wealth and its source before a stranger. Finally, what is the benefit or the service they might probably be receiving in return for paying the asked for tax, they may argue. However, this is not the predicament for the more urban and conscious section of the people. They often refrain from paying tax out of pure inertia or lack of habit. There are some high-earning professional groups, who are quite conscious of their duty of paying tax. They also belong to the most respected section of society by dint of the crucial service they render to the community. Oddly though, even the tax people are not as aggressive towards them as they are with other sections of the community. Ironically though, this group possesses huge amounts of undisclosed money.
Under the circumstances, one cannot then say that if there are some among these highly respected professionals, who own a large amount of undisclosed money, but are unwilling to disclose it before the NBR are not really respectable citizens?
Whatever the factors lying behind the poor turn out of the intended group of taxpayers, NBR's target of tax collection will face difficulty as a consequence.
The line of reasoning drawn above aims to demonstrate that collection of tax on income from the mentioned types of people is a kind of task that will demand extraordinary patience and skill. And our tax people must have the necessary patience in this respect and develop the necessary habit among the people in order that they might become respectable tax paying citizens.
They must also show them the benefits the declaration of the undisclosed income would bring for them. Any unnecessary use of scare tactics may not always produce the intended outcomes.
The government has used both hard and soft tactics to make those having undeclared source of income avail themselves of the opportunity to legalise their earning. Seeing that the response was rather encouraging last fiscal (2007-08) as some 42,459 people did turn up to legalise their incomes with the payment of 5 per cent penal tax in addition to normal tax, the NBR continued the provision of legalising undisclosed income even for the current fiscal. However, unlike in the last financial year when the revenue collection procedure for the possessors of undisclosed income was stricter and 'scare tactics' was used by the NBR to prompt them to disclose their entire income and whiten it through paying the usual as well as penal tax, this time the collection procedure has been made further lenient. However, in the previous fiscal, the rate of penal tax was less by two per cent than that of this year (seven per cent). And last year, the tax collection drive helped the National Board of Revenue (NBR) to collect a significant sum of money amounting Tk 8.02 billion.
Surprisingly though, the turn out of the targeted group of taxpayers was poor this fiscal in spite of the fact that the collection method used by the NBR this year was more relaxed.
Obviously, the revenue board has been a bit disappointed, for only about 2,000 people appeared to whiten their hidden income, which amounted to a mere Tk 1.50 billion. The government collected some Tk 200 million from that amount of declared hidden income this fiscal. The question that is pestering the NBR people is: was it right to be so persuasive and soft towards those erring citizens, who have broken the law of the land by keeping their earning secret from the government and thereby depriving it of the revenue due to them? And now that they are showing the arrogance of disregarding the NBR's offer, is it not the time to again come down hard on them?
Some even suggested the option of harder policing to compel the owners of undisclosed income to respect their offer and seize the opportunity.
Should they now return to the old tactics to discipline this recalcitrant group of taxpayers, as they are simply ignoring the gesture of goodwill from the NBR?
To be fair, the revenue officials have their legitimate reasons for getting upset at this poor turn out of the intended group of citizens possessing undisclosed sources of income.
A few questions arise here as regards this strange behaviour on the part of the particular group of citizens in question. Has the poor response this time been due solely to softer tactics used by NBR as a collection policy so rued by some officials of NBR? Or are there also other factors that have prompted that group of potential source of revenue for the government to shy away?
In fact, changing a particular policy out of any exasperation, since the softer NBR policy did not come up with the expected result as expected is not certainly an ideal approach to tackle the issue. For after only one trial one cannot hope to get the best result from a new policy or method introduced by the implementers of the policy concerned.
True, the revenue department has to be tough on the tax-dodgers to ensure their compliance with the tax laws of any country in the world. Even in the neighbouring India, the government is unforgiving towards the tax-evaders. The law is unsparing even towards the celebrities. Why should it then be otherwise in Bangladesh?
The argument is undoubtedly unassailable. But there is a catch here. Unlike other countries where the tax culture is well-established and the tax people apply the law without fear or favour, the environment in Bangladesh has its own specialty. The habit that paying tax is the duty of a citizen is yet to penetrate the popular consciousness. One cannot put the blame entirely on the taxable citizens for this apathy towards paying tax. If truth be told, the tax people need also to take some responsibility for the general aversion of the people towards paying tax. In fact, the system of collecting tax has to be made modern through introduction of latest tools and technology for the purpose.
The procedure of tax submission has to be made more user-friendly. At the same time, there should be helpline for the users so that they may fill in the forms on their own learning the chore as they are doing it. The tax people, though they may have to be tough towards the breakers of the tax laws, have also to keep in mind that they are not the ones with the big stick and always in pursuit of, as it were, the run-of-the-mill delinquents. Because, in the ultimate analysis their job is to increase the revenue earning of the people and meet the annual target of revenue collection. So, it is a far harder task than that of the normal law-enforcers. And as such, they need to develop a special kind of knowledge, skill and attitude.
As was told in the foregoing, Bangladesh is quite a different kettle of fish so far as the tax culture is concerned. The reason is that wealth is considered here as something very private. The act of peering into it by any outsider, questioning the owner about its source and the way it is being spent are looked upon as a kind of trespassing into one's private space. What is more, an uninitiated, but potential taxpayer may have the fear that he or she might be inviting unforeseen risk by laying bare his or her wealth and its source before a stranger. Finally, what is the benefit or the service they might probably be receiving in return for paying the asked for tax, they may argue. However, this is not the predicament for the more urban and conscious section of the people. They often refrain from paying tax out of pure inertia or lack of habit. There are some high-earning professional groups, who are quite conscious of their duty of paying tax. They also belong to the most respected section of society by dint of the crucial service they render to the community. Oddly though, even the tax people are not as aggressive towards them as they are with other sections of the community. Ironically though, this group possesses huge amounts of undisclosed money.
Under the circumstances, one cannot then say that if there are some among these highly respected professionals, who own a large amount of undisclosed money, but are unwilling to disclose it before the NBR are not really respectable citizens?
Whatever the factors lying behind the poor turn out of the intended group of taxpayers, NBR's target of tax collection will face difficulty as a consequence.
The line of reasoning drawn above aims to demonstrate that collection of tax on income from the mentioned types of people is a kind of task that will demand extraordinary patience and skill. And our tax people must have the necessary patience in this respect and develop the necessary habit among the people in order that they might become respectable tax paying citizens.
They must also show them the benefits the declaration of the undisclosed income would bring for them. Any unnecessary use of scare tactics may not always produce the intended outcomes.