Tax revenue need not be a one-way traffic
Tuesday, 14 October 2008
Shamsul Huq Zahid
THE government does need money to run its countrywide administrative network, no matter how sloth and ineffective it is. And taxes and duties levied by the government remain to be the main sources of earning to foot the salary bills of hundreds of thousands government employees and carry out development activities.
Since the tax and non-tax revenues are too inadequate compared to its needs, the government has to seek funds from external donors or borrow from banks to offset the budgetary deficit every year. However, the practice is nothing unique for Bangladesh. Most developing countries do face the same problem.
There is no denying the government's earning from the customs duty and the value added tax (VAT) would have been much more than what is fetched annually if the government could have plugged the leakages. But corruption and irregularities in customs and VAT collection are so widespread and rampant that it is really difficult for anyone's part to cleanse the system and collect the actual revenue. The vested interests in the revenue administration are so strong that any honest move to beef up revenue collection is bound to face steep hurdles. A case in point is the recent launching of the Chittagong Customs automation project under public-private partnership.
Allegations have it that some dishonest section of Customs officials opposed tooth and nail the project and left no stone unturned to foil the same. Even the official who handled the project was deliberately transferred to another place with the objective of stalling the project. But the taskforce that is now overseeing the activities in Chittagong port, the Chittagong Chamber of Commerce and Industry and other private and public stakeholders stood firm behind the project and saw it through. However, conspiracy, according to sources, is still on to undo the project.
The situation is no better in areas of income tax and VAT. Reform is a word hated by most people in the NBR. It is most likely that those who favour reforms and want higher revenue collection by streamlining the age-old tax collection procedures in the NBR are not liked by many taxmen. For, the changes in the status quo do hurt their interests.
Yet taking advantage of a favourable climate under a non-political caretaker government, a tiny group has been trying hard to motivate the potential taxpayers to pay tax and the existing taxpayers to pay tax in right amount. As part of the motivational campaign, taxmen have organised discussions and meetings with people belonging to various sections of the society in Dhaka and other places of the country. Even temporary camps have been set up by the NBR at upazilas as a part of the programme.
But the campaign, apparently, has not yet succeeded to make any breakthrough. There has been virtually no noticeable increase in the number of taxpayers. In a country of 140 million people only 0.6 million pay income tax despite the existence of 2.0 million tax identification number-TIN- holders.
Enough is enough-the NBR boss might have said to his colleagues out of frustration. So, the Board has devised other means to net tax evaders. It has decided to request the central bank to ensure that banks seek from their clients the tax-payment certificates, not TINs while transacting business with them.
The NBR has also decided to chase the tax-evading owners of private cars. It thinks, quite rightly, that a person who can afford a car must have the ability to pay tax. So, the Board has decided to introduce income tax payment stickers for car owners. What the taxpaying car owners would have to do is that he or she would collect a sticker from the tax officials concerned and paste the same to the car windscreens.
Every owner of private cars has to show his/ her TIN while doing the fitness tests of their vehicles at the Bangladesh Road Transport Authority offices every year. However, a large number of those TIN certificates are considered fake. Such fake certificates are also widely used in government offices and banks.
What is more interesting is that the fake TINs are produced in tax offices in exchange for money. So, what is the guarantee that the same corrupt tax officials would not produce fake tax payment certificates and tax stickers which the NBR top brass want to introduce to catch tax evaders?
However, if the NBR produces hallow gram stickers for the car owners, it might prove effective.
The propensity to evade tax by eligible taxpayers is nothing unique in Bangladesh. It does happen in most countries. But the rate of tax evasion in developed countries is very negligible because of a variety of reasons. Most people feel like paying taxes in those countries because they get direct benefits from the state. Besides, revenue officials in those countries are always on the hunt for tax evaders who, if caught, are certain to face harsh punishments for their white collar crime.
The NBR is meant to do the job of revenue collection for the government. It, however, cannot ensure any benefit for the people who pay tax or for the poor out of the tax-money.
It is both moral and legal obligation on the part of the eligible taxpayers to pay tax. But the government which spends the taxpayers' money should spend a part of it for the benefit of the taxpayers or the poor. Unfortunately, the major part of the revenue is spent on an inefficient, non-responsive and corrupt public administration that creates more problems for the people than solving those.
THE government does need money to run its countrywide administrative network, no matter how sloth and ineffective it is. And taxes and duties levied by the government remain to be the main sources of earning to foot the salary bills of hundreds of thousands government employees and carry out development activities.
Since the tax and non-tax revenues are too inadequate compared to its needs, the government has to seek funds from external donors or borrow from banks to offset the budgetary deficit every year. However, the practice is nothing unique for Bangladesh. Most developing countries do face the same problem.
There is no denying the government's earning from the customs duty and the value added tax (VAT) would have been much more than what is fetched annually if the government could have plugged the leakages. But corruption and irregularities in customs and VAT collection are so widespread and rampant that it is really difficult for anyone's part to cleanse the system and collect the actual revenue. The vested interests in the revenue administration are so strong that any honest move to beef up revenue collection is bound to face steep hurdles. A case in point is the recent launching of the Chittagong Customs automation project under public-private partnership.
Allegations have it that some dishonest section of Customs officials opposed tooth and nail the project and left no stone unturned to foil the same. Even the official who handled the project was deliberately transferred to another place with the objective of stalling the project. But the taskforce that is now overseeing the activities in Chittagong port, the Chittagong Chamber of Commerce and Industry and other private and public stakeholders stood firm behind the project and saw it through. However, conspiracy, according to sources, is still on to undo the project.
The situation is no better in areas of income tax and VAT. Reform is a word hated by most people in the NBR. It is most likely that those who favour reforms and want higher revenue collection by streamlining the age-old tax collection procedures in the NBR are not liked by many taxmen. For, the changes in the status quo do hurt their interests.
Yet taking advantage of a favourable climate under a non-political caretaker government, a tiny group has been trying hard to motivate the potential taxpayers to pay tax and the existing taxpayers to pay tax in right amount. As part of the motivational campaign, taxmen have organised discussions and meetings with people belonging to various sections of the society in Dhaka and other places of the country. Even temporary camps have been set up by the NBR at upazilas as a part of the programme.
But the campaign, apparently, has not yet succeeded to make any breakthrough. There has been virtually no noticeable increase in the number of taxpayers. In a country of 140 million people only 0.6 million pay income tax despite the existence of 2.0 million tax identification number-TIN- holders.
Enough is enough-the NBR boss might have said to his colleagues out of frustration. So, the Board has devised other means to net tax evaders. It has decided to request the central bank to ensure that banks seek from their clients the tax-payment certificates, not TINs while transacting business with them.
The NBR has also decided to chase the tax-evading owners of private cars. It thinks, quite rightly, that a person who can afford a car must have the ability to pay tax. So, the Board has decided to introduce income tax payment stickers for car owners. What the taxpaying car owners would have to do is that he or she would collect a sticker from the tax officials concerned and paste the same to the car windscreens.
Every owner of private cars has to show his/ her TIN while doing the fitness tests of their vehicles at the Bangladesh Road Transport Authority offices every year. However, a large number of those TIN certificates are considered fake. Such fake certificates are also widely used in government offices and banks.
What is more interesting is that the fake TINs are produced in tax offices in exchange for money. So, what is the guarantee that the same corrupt tax officials would not produce fake tax payment certificates and tax stickers which the NBR top brass want to introduce to catch tax evaders?
However, if the NBR produces hallow gram stickers for the car owners, it might prove effective.
The propensity to evade tax by eligible taxpayers is nothing unique in Bangladesh. It does happen in most countries. But the rate of tax evasion in developed countries is very negligible because of a variety of reasons. Most people feel like paying taxes in those countries because they get direct benefits from the state. Besides, revenue officials in those countries are always on the hunt for tax evaders who, if caught, are certain to face harsh punishments for their white collar crime.
The NBR is meant to do the job of revenue collection for the government. It, however, cannot ensure any benefit for the people who pay tax or for the poor out of the tax-money.
It is both moral and legal obligation on the part of the eligible taxpayers to pay tax. But the government which spends the taxpayers' money should spend a part of it for the benefit of the taxpayers or the poor. Unfortunately, the major part of the revenue is spent on an inefficient, non-responsive and corrupt public administration that creates more problems for the people than solving those.