Tax default by BBA: An example of bureaucratic inefficiency
Wednesday, 30 June 2010
Shamsul Huq Zahid
The National Board of Revenue (NBR) at the beginning of every financial year is given a revenue target. Failure to achieve that by any big margin at times draws flak, specially form the finance minister. Of late, rewards have been introduced for better performing revenue officials.
This carrot and stick policy of the policymakers has started paying, at least, some dividends. The share of direct taxes in the overall tax revenue has been on the rise. Though their performance remains well below the potentials, revenue officials are using a mix of motivational campaign and coercion to beef up revenue earning. Their prime targets are always individuals as well as private sector companies, both listed and unlisted.
But what if a fellow government agency behaves like a delinquent private sector taxpayer? Does not it sound strange? There could be pilferage of resources within a public sector organization. But the profit shown in the annual tax returns in black and white cannot be pocketed by anyone involved in its operation. So, there should not be any valid reason for the company concerned to default on payment of tax to the government.
But strange things do happen. And the Bangladesh Bridge Authority (BBA) is a glaring example. For years together the Bridge Authority, despite repeated requests from the NBR, has defaulted on the payment of tax on its profits on the plea of insufficient funds. According to a newspaper reports, the BBA owes nearly Tk 1.29 billion in taxes for the last four years to the government.
The NBR, reportedly, held a number of meetings with the BBA high officials but failed in their bid to recover the arrear tax. The taxmen having no option other than going tough on the BBA, have conducted searches for BBA accounts in banks and detected fixed deposits worth over Tk. 1.0 billion in the name of the latter with six banks, including three public sector corporatised banks. The NBR, in accordance with legal provision, has requested the banks concerned to pay to it the arrear taxes from those deposit accounts. But, following instructions from the BBA, the banks, reportedly, are refusing to pay the same. The NBR is now mulling lawful actions against the bank officials concerned.
The decision to punish the bank officials, instead of the BBA men, who, according to the NBR allegation, have refused to pay taxes to the government under different pretexts, seems strange. The NBR should have explored other administrative ways to make the BBA pay arrear taxes.
But the BBA high officials, however, has a different story to tell. Talking to the Financial Express, the head of the government's bridge division said it is nothing but dispute over tax rate is the main reason for non-payment of tax. The BBA has requested the government to cut the existing tax rate to 25 per cent from the existing 37 per cent since it is a 'service providing' organization. The BBA would pay the tax as soon as the government decision on the issue is available, the bridge division chief said.
However, the bridge division does need to explain as to why it is taking such a long time to get a decision from the government. The act under which the BBA has been set up, naturally, explains what type of organization it is. If there is any ambiguity in the act concerned, the law ministry is there to give a befitting interpretation. The dispute over tax rate should have been solved in no time.
The entire episode over tax dispute between two state-owned organizations speaks for itself the level of bureaucratic inefficiency in Bangladesh. The bridge division chief has not explained to whom and when the BBA did approach for a decision on tax rate. But if the decision was sought only recently, the BBA officials should be dealt with properly in accordance with law for their deliberate delay in settling the issue.
The incident of tax dispute, after being publicized in the media, would, no doubt, provide an encouragement to the private tax dodgers and also embarrass the taxmen who on occasions go hard on private organizations to squeeze out more tax money.
The communications ministry is supposed to bring the issue of tax rebate for the BBA to the notice of the finance ministry along with necessary explanations as to why the authority deserves such rebate. Now the two ministries owe an explanation to the members of the public. Only then it would be clear who is at fault.
The National Board of Revenue (NBR) at the beginning of every financial year is given a revenue target. Failure to achieve that by any big margin at times draws flak, specially form the finance minister. Of late, rewards have been introduced for better performing revenue officials.
This carrot and stick policy of the policymakers has started paying, at least, some dividends. The share of direct taxes in the overall tax revenue has been on the rise. Though their performance remains well below the potentials, revenue officials are using a mix of motivational campaign and coercion to beef up revenue earning. Their prime targets are always individuals as well as private sector companies, both listed and unlisted.
But what if a fellow government agency behaves like a delinquent private sector taxpayer? Does not it sound strange? There could be pilferage of resources within a public sector organization. But the profit shown in the annual tax returns in black and white cannot be pocketed by anyone involved in its operation. So, there should not be any valid reason for the company concerned to default on payment of tax to the government.
But strange things do happen. And the Bangladesh Bridge Authority (BBA) is a glaring example. For years together the Bridge Authority, despite repeated requests from the NBR, has defaulted on the payment of tax on its profits on the plea of insufficient funds. According to a newspaper reports, the BBA owes nearly Tk 1.29 billion in taxes for the last four years to the government.
The NBR, reportedly, held a number of meetings with the BBA high officials but failed in their bid to recover the arrear tax. The taxmen having no option other than going tough on the BBA, have conducted searches for BBA accounts in banks and detected fixed deposits worth over Tk. 1.0 billion in the name of the latter with six banks, including three public sector corporatised banks. The NBR, in accordance with legal provision, has requested the banks concerned to pay to it the arrear taxes from those deposit accounts. But, following instructions from the BBA, the banks, reportedly, are refusing to pay the same. The NBR is now mulling lawful actions against the bank officials concerned.
The decision to punish the bank officials, instead of the BBA men, who, according to the NBR allegation, have refused to pay taxes to the government under different pretexts, seems strange. The NBR should have explored other administrative ways to make the BBA pay arrear taxes.
But the BBA high officials, however, has a different story to tell. Talking to the Financial Express, the head of the government's bridge division said it is nothing but dispute over tax rate is the main reason for non-payment of tax. The BBA has requested the government to cut the existing tax rate to 25 per cent from the existing 37 per cent since it is a 'service providing' organization. The BBA would pay the tax as soon as the government decision on the issue is available, the bridge division chief said.
However, the bridge division does need to explain as to why it is taking such a long time to get a decision from the government. The act under which the BBA has been set up, naturally, explains what type of organization it is. If there is any ambiguity in the act concerned, the law ministry is there to give a befitting interpretation. The dispute over tax rate should have been solved in no time.
The entire episode over tax dispute between two state-owned organizations speaks for itself the level of bureaucratic inefficiency in Bangladesh. The bridge division chief has not explained to whom and when the BBA did approach for a decision on tax rate. But if the decision was sought only recently, the BBA officials should be dealt with properly in accordance with law for their deliberate delay in settling the issue.
The incident of tax dispute, after being publicized in the media, would, no doubt, provide an encouragement to the private tax dodgers and also embarrass the taxmen who on occasions go hard on private organizations to squeeze out more tax money.
The communications ministry is supposed to bring the issue of tax rebate for the BBA to the notice of the finance ministry along with necessary explanations as to why the authority deserves such rebate. Now the two ministries owe an explanation to the members of the public. Only then it would be clear who is at fault.