Tax Ombudsman: A new concept for Bangladesh
Saturday, 8 March 2008
Dr. Rashid ul Ahsan Chowdhury
DURING the last thirty seven years after the independence of Bangladesh, the public sector, especially the tax sector of the country has witnessed a spectacular growth. Unfortunately, this rapid growth has been accompanied by corruption, delay in decision making, incompetence and arbitrary actions displayed by tax officials at all levels of the tax departments. The entire expenses for such corruption, delay in decision making, incompetence and arbitrary actions have, however, been borne by the general tax-paying public with little or no "quick" or "thorough" relief available to them. Successive government's responses to such actions had been to bring out specialised laws to deal with corruption in tax departments. The philosophy behind introduction of such laws was based on deterrence against corruption and recovery of ill gotten wealth as opposed to actually concentrating on system reform in tax departments so as to prevent tax officials from amassing ill-gotten wealth in the first place.
Since these specialized laws had failed to root out corruption or to improve transparency in the tax departments, the government later on adopted a sensible "micro' approach to the problem attacking the problem at its root by promulgating the establishment of the Tax Ombudsman's Office in Bangladesh. The Tax Ombudsman Act, 2005 came into force on 12th July 2005 and promulgation of the Act was followed on by the appointment of a Tax Ombudsman and the office of the Tax Ombudsman officially started operating from 9th July, 2006. In the year 2007, under section 38 of the Tax Ombudsman Act, the Tax Ombudsman (Complaint, Investigation and disposal of Cases) Rules was framed to allow the Tax Ombudsman to take on complaints, investigate and suggest remedies to safeguard tax payers from the maladministration or malafide decisions of the tax authorities.
Although a new concept in Bangladesh, the evolution of the modern Ombudsman system dates back a few centuries. It was first founded in Sweden and is now a functionary of the Swedish Parliament. The Swedish Tax Ombudsman is empowered to investigate any complaint brought to him by a Member of the Parliament against the government departments and if found to be genuine to rectify the same by a suitable remedy. Adopted by New Zealand and the United Kingdom later, the same has generally spread throughout the world and is recognized in most democratic countries as an effective means of controlling arbitrary actions of government officials. At present there are 270 Ombudsman institutions in 114 countries of the world. Two major international organizations represent the Ombudsman of different countries/regions. These are the International Ombudsman Institute and the Asian Ombudsman Association. These institutes promote the concept of Ombudsmanship, encourage and support research, operate educational programmes having links with Ombudsmanship and collect, store and disseminate information about the Ombudsmanship institutions.
The office of the Tax Ombudsman in Bangladesh is a quasi-judicial institution having well defined jurisdiction, functions and powers to provide relief to the tax payers who are victims at the hands of any of the departments collecting revenue for the government, be it Income Tax, Value Added Tax or Customs duty. The task of the Tax Ombudsman is to diagnose, investigate, redress and rectify any injustice done to a person through maladministration by the functionaries administering tax laws. The jurisdiction of the office, however, does not extend to those cases that are sub-judiced before a court or tribunal of competent jurisdiction or those that fall within executive functions of the tax authorities such as assessment of tax, value, classification of goods etc. The Tax Ombudsman can, however, take cognizance of any case referred to him by the Prime Minister, the Parliament, or a motion of the Supreme Court or the High Court during the course of any proceedings or of his own motion. The basic consideration is to ensure that the rights of the tax payers, to the extent possible, are respected by the tax departments and principles of good governance followed.
The important areas of maladministration which can be investigated by the Tax Ombudsman relate to decision, process or recommendation which is contrary to law, rules or regulations; and is perverse, arbitrary, discriminatory or unreasonable. It also relates to exercise of powers for corrupt or improper motives; neglect, inattention, delay, incompetence and inefficiency. The office has the authority to investigate complaints on such grounds as issuance of repeated notices, requirement of unnecessary attendance and prolonged hearings deliberately done to harass the client. The Ombudsman is also entrusted with the power to investigate cases where there is a willful error in the determination of refunds; deliberate withholding of refunds; coercive methods of tax recovery and avoidance of disciplinary action against an officer who is held by a competent appellate authority to be vindictive, whimsical or biased.
The procedure for filing complaints with the Tax Ombudsman is laid down under section 18 of the Act. Any person aggrieved by a decision of the tax authority has to address a complaint to the Ombudsman on solemn affirmation in writing that contents of the complaint are true and correct. The aggrieved party must also file the complaint within six months from the date of receipt of the notice which is the subject matter of the complaint. However, the Ombudsman can investigate any complaint, which had not been submitted within the required time limit, if he takes into account that the complaint has merit and requires investigation for the sake of justice. The Ombudsman is required to provide opportunity to the functionaries of the tax departments whose actions are subject matters of complaints to reply to the allegations. He is also required to provide opportunity to both the parties to be heard in person or through an authorized representative. However, if he decides not to conduct an investigation, as per the Act he will send to the complainant a statement of his reasons for not conducting the investigation.
After investigation of a complaint, if it appears to the Tax Ombudsman that an injustice has been caused to the person aggrieved in consequence of maladministration, he will send his findings with remedial recommendations to the National Board of Revenue within fifteen days from the date of completion of the investigation. On receipt of the recommendation, the National Board of revenue will have to inform the Tax Ombudsman within sixty days about the action taken on his recommendations or for the reasons for not complying with the same. If the National Board of Revenue does not comply with the recommendation made by the Tax Ombudsman or does not give reasons to the satisfaction of the Tax Ombudsman for non-compliance, he will refer the matter to the Finance Minister, and the latter will either direct the National Board of Revenue to implement the recommendation or request the Ombudsman to reconsider his recommendation.
The Tax Ombudsman performs his functions and exercises his powers independent of the executive and all executive authorities throughout Bangladesh are required to act in aid of the Tax Ombudsman. He can summon and enforce the attendance of any person to furnish information on points that may be relevant to the subject matter of any investigation. The Tax Ombudsman or any authorized staff member may for the purpose of investigation enter any premise and inspect any article books of account and documents and impound or seal such articles. If the Tax Ombudsman tasks the National Board of Revenue to implement his recommendation and the Board fails in this task, then the responsibility of such failure shall lie with the Board. If the task of implementing the recommendation of the Tax Ombudsman lies with any tax official, and in case of failure to implement such a task, the concerned tax official shall be accountable for such failure. In such cases, the Tax Ombudsman has the authority to suggest to the higher authority disciplinary action against the officials concerned. The Tax Ombudsman can also award reasonable compensation to an aggrieved person if he incurs financial loss because of any action or decision of the tax authority.
The best advantage of this office is that it is easily accessible, is free of cost and is welfare oriented. Yet it has no adversarial relationship with the revenue collecting departments. The office is result oriented and delivers justice speedily and bridges the gaping gap that exists between the tax payers and the revenues authorities, thereby mitigating "trust deficit." Another important function of the office is that it can informally conciliate, amicably resolve, stipulate, settle or ameliorate any grievance without written memorandum and without the necessity of docketing any complaint, or issuing any official notice. The office also enjoys immunity. No suit, prosecution or other legal proceedings can be drawn against the Tax Ombudsman or his staff members or any person authorized by the Ombudsman for anything which is done in good faith or intended to be done under good faith.
However, the office has its critics. In the media and amongst tax payers many have identified the office as "a toothless tiger," "a watch-dog in chains," "a sword-less crusader," or "an ombudsflop." These critics accuse that the Tax Ombudsman has only the prerogative to suggest recommendation to rectify maladministration and acceptance of its recommendation is not obligatory on the part of the National Board of Revenue. In case of a dispute, if the recommendation of the Ombudsman's office is not implemented by the National Board of Revenue, the critics believe, the dispute will hang on and instead of awarding relief to the complainant, it will increase his suffering manifold. As a result, the idea of providing immediate redress will come to naught. This accusation may have some truth, but the evidences point out otherwise.
In the year 2007, the office of the Tax Ombudsman received 119 complaints. Out of the total number, 47 complaints were docketed for investigation. The rest 72 were not entertained because they did not have sufficient merit for investigation. From the 47 docketed cases, 36 were investigated and disposed off with recommendations to the National Board of Revenue to rectify the irregularities identified in the course of investigation. So far 11 recommendations forwarded by the Tax Ombudsman office have been implemented by the National Board of Revenue and its subordinate offices and the remaining 25 are under the process of implementation. The National Board of Revenue so far has not raised a single objection to any of the recommendations and that substantiates that the system is working well. Further, after monitoring tax officials' approach toward the recommendations, it has been found that generally positive attitude has been shown by the tax collecting departments in the compliance of recommendations. Therefore, remedial measures recommended by the Tax Ombudsman's office to improve the system of tax administration and provide correct tax assessments are significantly helping to restore tax payer's confidence in the revenue departments.
In addition, the Tax Ombudsman's office has also identified some major causes of maladministration and recommended appropriate steps to the National Board of Revenue for eradication of such malpractices. Major irritants causing genuine discontent among the tax payers were found to be the following:
1] Improper maintenance of record of tax payers;
2] General slackness in responding to tax payer's applications/ enquiries;
3] Unlawful and extra legal decision making;
3] Reluctance to issue determined refund;
4] Subversion and disuse of prescribed office procedures;
4] Deficiency of knowledge and skill.
These irritants invariably cause corruption, delay in decision making and delay in payment of refund. As a result, the confidence of honest tax payers gets damaged, the investors, particularly the foreign ones, get discouraged, and hence loss to the national exchequer is caused.
The mandate of the tax Ombudsman is, therefore, to wipe out these irritants by ensuring accountability and transparency in the revenue offices and thereby restoring stake holder's trust and confidence in the revenue departments. These actions of providing relief to aggrieved taxpayers and eradicating maladministration will go a long way in creating mass awareness about the role and functions of the Tax Ombudsman's office and enlisting support and confidence of the stakeholders.
The writer is Advisor (Indirect Tax), Office of the Tax Ombudsman
DURING the last thirty seven years after the independence of Bangladesh, the public sector, especially the tax sector of the country has witnessed a spectacular growth. Unfortunately, this rapid growth has been accompanied by corruption, delay in decision making, incompetence and arbitrary actions displayed by tax officials at all levels of the tax departments. The entire expenses for such corruption, delay in decision making, incompetence and arbitrary actions have, however, been borne by the general tax-paying public with little or no "quick" or "thorough" relief available to them. Successive government's responses to such actions had been to bring out specialised laws to deal with corruption in tax departments. The philosophy behind introduction of such laws was based on deterrence against corruption and recovery of ill gotten wealth as opposed to actually concentrating on system reform in tax departments so as to prevent tax officials from amassing ill-gotten wealth in the first place.
Since these specialized laws had failed to root out corruption or to improve transparency in the tax departments, the government later on adopted a sensible "micro' approach to the problem attacking the problem at its root by promulgating the establishment of the Tax Ombudsman's Office in Bangladesh. The Tax Ombudsman Act, 2005 came into force on 12th July 2005 and promulgation of the Act was followed on by the appointment of a Tax Ombudsman and the office of the Tax Ombudsman officially started operating from 9th July, 2006. In the year 2007, under section 38 of the Tax Ombudsman Act, the Tax Ombudsman (Complaint, Investigation and disposal of Cases) Rules was framed to allow the Tax Ombudsman to take on complaints, investigate and suggest remedies to safeguard tax payers from the maladministration or malafide decisions of the tax authorities.
Although a new concept in Bangladesh, the evolution of the modern Ombudsman system dates back a few centuries. It was first founded in Sweden and is now a functionary of the Swedish Parliament. The Swedish Tax Ombudsman is empowered to investigate any complaint brought to him by a Member of the Parliament against the government departments and if found to be genuine to rectify the same by a suitable remedy. Adopted by New Zealand and the United Kingdom later, the same has generally spread throughout the world and is recognized in most democratic countries as an effective means of controlling arbitrary actions of government officials. At present there are 270 Ombudsman institutions in 114 countries of the world. Two major international organizations represent the Ombudsman of different countries/regions. These are the International Ombudsman Institute and the Asian Ombudsman Association. These institutes promote the concept of Ombudsmanship, encourage and support research, operate educational programmes having links with Ombudsmanship and collect, store and disseminate information about the Ombudsmanship institutions.
The office of the Tax Ombudsman in Bangladesh is a quasi-judicial institution having well defined jurisdiction, functions and powers to provide relief to the tax payers who are victims at the hands of any of the departments collecting revenue for the government, be it Income Tax, Value Added Tax or Customs duty. The task of the Tax Ombudsman is to diagnose, investigate, redress and rectify any injustice done to a person through maladministration by the functionaries administering tax laws. The jurisdiction of the office, however, does not extend to those cases that are sub-judiced before a court or tribunal of competent jurisdiction or those that fall within executive functions of the tax authorities such as assessment of tax, value, classification of goods etc. The Tax Ombudsman can, however, take cognizance of any case referred to him by the Prime Minister, the Parliament, or a motion of the Supreme Court or the High Court during the course of any proceedings or of his own motion. The basic consideration is to ensure that the rights of the tax payers, to the extent possible, are respected by the tax departments and principles of good governance followed.
The important areas of maladministration which can be investigated by the Tax Ombudsman relate to decision, process or recommendation which is contrary to law, rules or regulations; and is perverse, arbitrary, discriminatory or unreasonable. It also relates to exercise of powers for corrupt or improper motives; neglect, inattention, delay, incompetence and inefficiency. The office has the authority to investigate complaints on such grounds as issuance of repeated notices, requirement of unnecessary attendance and prolonged hearings deliberately done to harass the client. The Ombudsman is also entrusted with the power to investigate cases where there is a willful error in the determination of refunds; deliberate withholding of refunds; coercive methods of tax recovery and avoidance of disciplinary action against an officer who is held by a competent appellate authority to be vindictive, whimsical or biased.
The procedure for filing complaints with the Tax Ombudsman is laid down under section 18 of the Act. Any person aggrieved by a decision of the tax authority has to address a complaint to the Ombudsman on solemn affirmation in writing that contents of the complaint are true and correct. The aggrieved party must also file the complaint within six months from the date of receipt of the notice which is the subject matter of the complaint. However, the Ombudsman can investigate any complaint, which had not been submitted within the required time limit, if he takes into account that the complaint has merit and requires investigation for the sake of justice. The Ombudsman is required to provide opportunity to the functionaries of the tax departments whose actions are subject matters of complaints to reply to the allegations. He is also required to provide opportunity to both the parties to be heard in person or through an authorized representative. However, if he decides not to conduct an investigation, as per the Act he will send to the complainant a statement of his reasons for not conducting the investigation.
After investigation of a complaint, if it appears to the Tax Ombudsman that an injustice has been caused to the person aggrieved in consequence of maladministration, he will send his findings with remedial recommendations to the National Board of Revenue within fifteen days from the date of completion of the investigation. On receipt of the recommendation, the National Board of revenue will have to inform the Tax Ombudsman within sixty days about the action taken on his recommendations or for the reasons for not complying with the same. If the National Board of Revenue does not comply with the recommendation made by the Tax Ombudsman or does not give reasons to the satisfaction of the Tax Ombudsman for non-compliance, he will refer the matter to the Finance Minister, and the latter will either direct the National Board of Revenue to implement the recommendation or request the Ombudsman to reconsider his recommendation.
The Tax Ombudsman performs his functions and exercises his powers independent of the executive and all executive authorities throughout Bangladesh are required to act in aid of the Tax Ombudsman. He can summon and enforce the attendance of any person to furnish information on points that may be relevant to the subject matter of any investigation. The Tax Ombudsman or any authorized staff member may for the purpose of investigation enter any premise and inspect any article books of account and documents and impound or seal such articles. If the Tax Ombudsman tasks the National Board of Revenue to implement his recommendation and the Board fails in this task, then the responsibility of such failure shall lie with the Board. If the task of implementing the recommendation of the Tax Ombudsman lies with any tax official, and in case of failure to implement such a task, the concerned tax official shall be accountable for such failure. In such cases, the Tax Ombudsman has the authority to suggest to the higher authority disciplinary action against the officials concerned. The Tax Ombudsman can also award reasonable compensation to an aggrieved person if he incurs financial loss because of any action or decision of the tax authority.
The best advantage of this office is that it is easily accessible, is free of cost and is welfare oriented. Yet it has no adversarial relationship with the revenue collecting departments. The office is result oriented and delivers justice speedily and bridges the gaping gap that exists between the tax payers and the revenues authorities, thereby mitigating "trust deficit." Another important function of the office is that it can informally conciliate, amicably resolve, stipulate, settle or ameliorate any grievance without written memorandum and without the necessity of docketing any complaint, or issuing any official notice. The office also enjoys immunity. No suit, prosecution or other legal proceedings can be drawn against the Tax Ombudsman or his staff members or any person authorized by the Ombudsman for anything which is done in good faith or intended to be done under good faith.
However, the office has its critics. In the media and amongst tax payers many have identified the office as "a toothless tiger," "a watch-dog in chains," "a sword-less crusader," or "an ombudsflop." These critics accuse that the Tax Ombudsman has only the prerogative to suggest recommendation to rectify maladministration and acceptance of its recommendation is not obligatory on the part of the National Board of Revenue. In case of a dispute, if the recommendation of the Ombudsman's office is not implemented by the National Board of Revenue, the critics believe, the dispute will hang on and instead of awarding relief to the complainant, it will increase his suffering manifold. As a result, the idea of providing immediate redress will come to naught. This accusation may have some truth, but the evidences point out otherwise.
In the year 2007, the office of the Tax Ombudsman received 119 complaints. Out of the total number, 47 complaints were docketed for investigation. The rest 72 were not entertained because they did not have sufficient merit for investigation. From the 47 docketed cases, 36 were investigated and disposed off with recommendations to the National Board of Revenue to rectify the irregularities identified in the course of investigation. So far 11 recommendations forwarded by the Tax Ombudsman office have been implemented by the National Board of Revenue and its subordinate offices and the remaining 25 are under the process of implementation. The National Board of Revenue so far has not raised a single objection to any of the recommendations and that substantiates that the system is working well. Further, after monitoring tax officials' approach toward the recommendations, it has been found that generally positive attitude has been shown by the tax collecting departments in the compliance of recommendations. Therefore, remedial measures recommended by the Tax Ombudsman's office to improve the system of tax administration and provide correct tax assessments are significantly helping to restore tax payer's confidence in the revenue departments.
In addition, the Tax Ombudsman's office has also identified some major causes of maladministration and recommended appropriate steps to the National Board of Revenue for eradication of such malpractices. Major irritants causing genuine discontent among the tax payers were found to be the following:
1] Improper maintenance of record of tax payers;
2] General slackness in responding to tax payer's applications/ enquiries;
3] Unlawful and extra legal decision making;
3] Reluctance to issue determined refund;
4] Subversion and disuse of prescribed office procedures;
4] Deficiency of knowledge and skill.
These irritants invariably cause corruption, delay in decision making and delay in payment of refund. As a result, the confidence of honest tax payers gets damaged, the investors, particularly the foreign ones, get discouraged, and hence loss to the national exchequer is caused.
The mandate of the tax Ombudsman is, therefore, to wipe out these irritants by ensuring accountability and transparency in the revenue offices and thereby restoring stake holder's trust and confidence in the revenue departments. These actions of providing relief to aggrieved taxpayers and eradicating maladministration will go a long way in creating mass awareness about the role and functions of the Tax Ombudsman's office and enlisting support and confidence of the stakeholders.
The writer is Advisor (Indirect Tax), Office of the Tax Ombudsman