Tax policy needs to be equitable and adequate
Thursday, 30 September 2010
Syed Mahbubur Rashid
Tax day was observed on September 15 with pomp and grandeur, of course with a lot of grandiloquence from the two mandarins. This day was first observed on September 15, 2008. Now it has become an annual phenomenon. The object is to rouse the people's awareness about paying tax. The government needs money to run the affairs of the state. So a citizen should pay tax.
In the USA, there is a very common adage which is like this, "Tax and death, you cannot avoid."
In Bangladesh also people pay tax but the tax GDP ratio is poor. It is 8.5 per cent in Bangladesh against 17.5 per cent in India and 14.5 per cent in war-torn Sri Lanka. An analyst in a leading English daily has ascribed this to the reluctance of the Bangladesh to pay tax. But this is not the whole truth. There are a good number of reasons. First of all the arcane tax law confuse the people and were they can not satisfy them by talking with the tax lawyers. They also fear that once they start payment of tax, the figure will go on rising every year whether there is valid ground or not. The last but not the least is the escape route for nonpayment of tax.
The government is understandably aware of all these issues and the observance of the tax day and tax fair has been aimed at removing the misgiving and encouraging the people to pay tax. But ceremonies will not be useful without proper and effective steps being taken. The government has claimed that the form for payment by small tax holders has been simplified. Major or minor, the form should be simple and understandable for all. While talking recently with a group of businessmen, the finance minister assured them that there would be less harassment. Then the pertinent issue i.e. the question of harassment, remains there. It is said that the laws were framed by the colonial masters and hence such sufferings of the people. The people are no more interested in listening to these banal stories. This is the digital age. Tax authorities should simplify the whole process as early as possible. This year a number of tax payers have been rewarded. This will definitely encourage other people to do so. At present less than one million people pay tax. Tax authorities' drive is to raise the figure up to 100 million persons. All will be happy and wish success of the tax authorities. As citizens of Bangladesh, we will feel ourselves proud if our people pay tax more and more in number and our leaders will then have to beg less for largesse abroad.
This indications are that the government has been laying stress the horizontal increase of the number of tax payers. But does the government have the unfettered freedom in pushing this move? Let us quote a few lines from a document in connection with the alleviation of poverty by the planning commission. "Despite rises in household income, income distribution has become more unequal overtime. The bottom 5.0 per cent of the population received 0.77 per cent of the total income in 2005 down from 0.93 per cent in 2000. The bottom 40 per cent of the population which coincides with the share of the poor in total population received only 14.4 per cent of the total income in 2005. On the other hands the top 5.0 per cent received nearly 27 per cent of the total income in 2005". The figures date back to five years. But we are sure that the situation has deteriorated further.
All the successive governments including the present one have preached pro-poor policy but practiced pro-rich one. While speaking on the opening day of a three-day high level plenary meeting of the UN Secretary General convened by General Secretary Ban-Ki-moon on progress towards the MDGs, the Prime Minister, Sheikh Hasina mentioned some problems which included the income inequality. That is the manifestation of the fact that the income inequality is going to be a gargantuan problem.
The matter does not end here. Today tomorrow the government will have to raise the ceiling of tax exemption amounting to Tk 1,65,000 because of the continued price hike of essentials. Rather in view of the serious income inequality, the government will have to pay greater attention to the vertical increase. If the fortunate few do not pay tax properly, it is sure to create frustration and frustrate the move taken by the government to attract more tax payers. Then there are certain other sensitive issues. Government officials do not pay tax. It sounds more ridiculous when it is said that the government does pay their income taxes. But whose many they pay and on what authority?
Under Article 27 of the Constitution of the Republic, all citizen are equal before law. Whoever earns income which exceeds tax exemption level, shall have to pay tax. Why should a government official enjoy extra privileges. The government officials are exhibited to get accommodation, transport etc. Then again why they will be exempted from paying income tax. Are they inducted into the service against their will.
Again in case of capital gain tax, the institutional investors are to pay 10 per cent on capital gains. This is exempted at the individual level. This has been done due to the pressure from some influential stock brokers.
But any kind of discrimination will create hatred and frustration. Another most important issue is the exemption of tax upon the salary and allowances paid to the members of the parliament. Earlier on several occasions, the MPs were provided with luxurious duty free cars. This reminds us of a story of India. Dr Rajendra Prasad was only person who was elected twice as the president of India. After leaving office, he wanted to import a car for his personal use. He applied to the Ministry of Finance of the Government of India for tax exemption. But that was rejected by the Finance Ministry of the Government of India as there was no such provision in the law. The members of the parliament are honourable persons. They are the representatives of the people.
The parliament is the supreme lawmaking body for the people and the Republic. But if it passes any law for the benefit of its members, particularly of the type that which cannot be enjoyed by any other citizens is it not a discrimination? This is not otherwise allowed by the Constitution. If necessary, the members of the parliament may draw more allowances than the present ones. But they should pay taxes. Let them establish the fact that all persons are equal before law.
Fiscal management of the state should not be confined to the imposition of taxes and borrowing either from domestic banks or from external agencies. Austerity is a word which our leaders should recollect. In the budget of 2009-2010, the Finance Minister, in his budget speech had asked for austerity and belt-tightening. These two words have found no mention at all in the budget speech in the current fiscal. Only the Finance Ministry can unlock its mystery.
The Prime Minister in her speech in New York, as mentioned earlier, has appealed for more fund for a achieving they millennium development goals (MDGs) but her entourage consists of more than hundred members. Is it befitting?
Tax day was observed on September 15 with pomp and grandeur, of course with a lot of grandiloquence from the two mandarins. This day was first observed on September 15, 2008. Now it has become an annual phenomenon. The object is to rouse the people's awareness about paying tax. The government needs money to run the affairs of the state. So a citizen should pay tax.
In the USA, there is a very common adage which is like this, "Tax and death, you cannot avoid."
In Bangladesh also people pay tax but the tax GDP ratio is poor. It is 8.5 per cent in Bangladesh against 17.5 per cent in India and 14.5 per cent in war-torn Sri Lanka. An analyst in a leading English daily has ascribed this to the reluctance of the Bangladesh to pay tax. But this is not the whole truth. There are a good number of reasons. First of all the arcane tax law confuse the people and were they can not satisfy them by talking with the tax lawyers. They also fear that once they start payment of tax, the figure will go on rising every year whether there is valid ground or not. The last but not the least is the escape route for nonpayment of tax.
The government is understandably aware of all these issues and the observance of the tax day and tax fair has been aimed at removing the misgiving and encouraging the people to pay tax. But ceremonies will not be useful without proper and effective steps being taken. The government has claimed that the form for payment by small tax holders has been simplified. Major or minor, the form should be simple and understandable for all. While talking recently with a group of businessmen, the finance minister assured them that there would be less harassment. Then the pertinent issue i.e. the question of harassment, remains there. It is said that the laws were framed by the colonial masters and hence such sufferings of the people. The people are no more interested in listening to these banal stories. This is the digital age. Tax authorities should simplify the whole process as early as possible. This year a number of tax payers have been rewarded. This will definitely encourage other people to do so. At present less than one million people pay tax. Tax authorities' drive is to raise the figure up to 100 million persons. All will be happy and wish success of the tax authorities. As citizens of Bangladesh, we will feel ourselves proud if our people pay tax more and more in number and our leaders will then have to beg less for largesse abroad.
This indications are that the government has been laying stress the horizontal increase of the number of tax payers. But does the government have the unfettered freedom in pushing this move? Let us quote a few lines from a document in connection with the alleviation of poverty by the planning commission. "Despite rises in household income, income distribution has become more unequal overtime. The bottom 5.0 per cent of the population received 0.77 per cent of the total income in 2005 down from 0.93 per cent in 2000. The bottom 40 per cent of the population which coincides with the share of the poor in total population received only 14.4 per cent of the total income in 2005. On the other hands the top 5.0 per cent received nearly 27 per cent of the total income in 2005". The figures date back to five years. But we are sure that the situation has deteriorated further.
All the successive governments including the present one have preached pro-poor policy but practiced pro-rich one. While speaking on the opening day of a three-day high level plenary meeting of the UN Secretary General convened by General Secretary Ban-Ki-moon on progress towards the MDGs, the Prime Minister, Sheikh Hasina mentioned some problems which included the income inequality. That is the manifestation of the fact that the income inequality is going to be a gargantuan problem.
The matter does not end here. Today tomorrow the government will have to raise the ceiling of tax exemption amounting to Tk 1,65,000 because of the continued price hike of essentials. Rather in view of the serious income inequality, the government will have to pay greater attention to the vertical increase. If the fortunate few do not pay tax properly, it is sure to create frustration and frustrate the move taken by the government to attract more tax payers. Then there are certain other sensitive issues. Government officials do not pay tax. It sounds more ridiculous when it is said that the government does pay their income taxes. But whose many they pay and on what authority?
Under Article 27 of the Constitution of the Republic, all citizen are equal before law. Whoever earns income which exceeds tax exemption level, shall have to pay tax. Why should a government official enjoy extra privileges. The government officials are exhibited to get accommodation, transport etc. Then again why they will be exempted from paying income tax. Are they inducted into the service against their will.
Again in case of capital gain tax, the institutional investors are to pay 10 per cent on capital gains. This is exempted at the individual level. This has been done due to the pressure from some influential stock brokers.
But any kind of discrimination will create hatred and frustration. Another most important issue is the exemption of tax upon the salary and allowances paid to the members of the parliament. Earlier on several occasions, the MPs were provided with luxurious duty free cars. This reminds us of a story of India. Dr Rajendra Prasad was only person who was elected twice as the president of India. After leaving office, he wanted to import a car for his personal use. He applied to the Ministry of Finance of the Government of India for tax exemption. But that was rejected by the Finance Ministry of the Government of India as there was no such provision in the law. The members of the parliament are honourable persons. They are the representatives of the people.
The parliament is the supreme lawmaking body for the people and the Republic. But if it passes any law for the benefit of its members, particularly of the type that which cannot be enjoyed by any other citizens is it not a discrimination? This is not otherwise allowed by the Constitution. If necessary, the members of the parliament may draw more allowances than the present ones. But they should pay taxes. Let them establish the fact that all persons are equal before law.
Fiscal management of the state should not be confined to the imposition of taxes and borrowing either from domestic banks or from external agencies. Austerity is a word which our leaders should recollect. In the budget of 2009-2010, the Finance Minister, in his budget speech had asked for austerity and belt-tightening. These two words have found no mention at all in the budget speech in the current fiscal. Only the Finance Ministry can unlock its mystery.
The Prime Minister in her speech in New York, as mentioned earlier, has appealed for more fund for a achieving they millennium development goals (MDGs) but her entourage consists of more than hundred members. Is it befitting?