The proposal to introduce tax cards and beyond
Wednesday, 28 April 2010
Shamsul Huq Zahid
The Dhaka Chamber of Commerce and Industry (DCCI) has come out with a unique idea of introducing tax cards to help boost tax revenue and better tax compliance.
What the DCCI has suggested is that tax cards to be issued by the government would make the taxpayers entitled to certain monetary and non-monetary benefits.
According to the proposal floated in a concept paper submitted by the chamber recently to the ministry of finance, the holders of six types of tax cards, to be categorized on the basis of amounts of tax paid, should be offered certain privileges in public sector medical services, ports, banks, hotels educational institutions, capital market and services provided by the government. The chamber has a feeling that the cards would be status symbols in a society where tax evasion is extensive.
The DCCI is right in its observation that taxpayers lose interest in tax payments since the state is failing to provide any incentive to them. Both taxpayers and non-taxpayers are treated equally when it comes to public sector service and benefit delivery system.
There is no denying that systemic failures are basically responsible for poor tax compliance in Bangladesh where only 0.8 million (800,000) people pay income tax. But the frustration among the people about both quality and quantity of services made available by the government has been surely contributing to lower rate of tax compliance. Many people, who are eligible to pay tax, do refrain themselves from paying tax out of the feeling that as taxpayers they would not be entitled to any benefit, financial or otherwise.
However, the government cannot differentiate between a taxpayer and a non-taxpayer in service delivery or any other matter for the country's Constitution prohibits such differentiation. The state, according to article 19 of the Constitution, shall endeavour to ensure equality of opportunity to 'all citizens'.
The finance minister, reportedly, appreciated the tax-card proposal and assured the DCCI of considering the same seriously for inclusion in the next budget.
But anyone while appreciating the DCCI proposal cannot overlook the government's limited capacity to deliver its services to the people. For instance, the number of government hospitals is very limited and the quality of services offered in these facilities has been poor. The large individual taxpayers who are few in numbers would never go to government hospitals.
But a good number of middleclass taxpayers would prefer government hospitals if the government decides to offer quality health services to taxpayers. In that case, non-taxpayers, who are generally poor, might be deprived of inadequate attention that they are getting now in government-run health facilities.
The government is likely to face similar situation in other service delivery areas if it decides to offer certain privileges to the taxpayers.
There are, thus, some risks if the government decides to introduce tax cards without creating necessary facilities for the privileged taxpayers. Then again, frustration among the taxpayers would go further up if the government fails to make available the promised incentives to the taxpayers.
So, the government might consider offering a few incentives to the taxpayers that would not anyway encroach upon the scanty facilities enjoyed by the poorer sections of the society.
In the meanwhile, it should try to create some facilities exclusively for the taxpayers, without giving rise to a sense of discrimination among the citizens who do not have tax-payable incomes.
The proposal to introduce tax cards to help encourage better tax compliance deserves appreciation, no doubt. But the problem of tax evasion is so extensive that it needs more effective solution.
Though the collection of income tax has gone up in recent years, it is still a small amount compared to actual potentials. Without a wholesale reform of the tax administration and effective chasing of the tax evaders by a determined and dedicated group of revenue officials, the government can hardly expect any major improvement in direct tax collection in the near future.
On the top of everything, the people who run the administration do need to be clean as far as their tax payments. Had they been really clean in their annual tax return submission the reform and speed in tax collection would have come automatically.
US President Barack Obama and his wife together have paid $ 1.8 million in taxes to the government. The payment included the tax on Obama's income from two of his best selling recent books. In the USA, the people are informed about the assets their leaders own and the tax they pay every year. Shouldn't the government leaders, politicians of high stature, top businesses and professionals, at least, try to set a few such examples?
Zahidmar10@gmail.com
The Dhaka Chamber of Commerce and Industry (DCCI) has come out with a unique idea of introducing tax cards to help boost tax revenue and better tax compliance.
What the DCCI has suggested is that tax cards to be issued by the government would make the taxpayers entitled to certain monetary and non-monetary benefits.
According to the proposal floated in a concept paper submitted by the chamber recently to the ministry of finance, the holders of six types of tax cards, to be categorized on the basis of amounts of tax paid, should be offered certain privileges in public sector medical services, ports, banks, hotels educational institutions, capital market and services provided by the government. The chamber has a feeling that the cards would be status symbols in a society where tax evasion is extensive.
The DCCI is right in its observation that taxpayers lose interest in tax payments since the state is failing to provide any incentive to them. Both taxpayers and non-taxpayers are treated equally when it comes to public sector service and benefit delivery system.
There is no denying that systemic failures are basically responsible for poor tax compliance in Bangladesh where only 0.8 million (800,000) people pay income tax. But the frustration among the people about both quality and quantity of services made available by the government has been surely contributing to lower rate of tax compliance. Many people, who are eligible to pay tax, do refrain themselves from paying tax out of the feeling that as taxpayers they would not be entitled to any benefit, financial or otherwise.
However, the government cannot differentiate between a taxpayer and a non-taxpayer in service delivery or any other matter for the country's Constitution prohibits such differentiation. The state, according to article 19 of the Constitution, shall endeavour to ensure equality of opportunity to 'all citizens'.
The finance minister, reportedly, appreciated the tax-card proposal and assured the DCCI of considering the same seriously for inclusion in the next budget.
But anyone while appreciating the DCCI proposal cannot overlook the government's limited capacity to deliver its services to the people. For instance, the number of government hospitals is very limited and the quality of services offered in these facilities has been poor. The large individual taxpayers who are few in numbers would never go to government hospitals.
But a good number of middleclass taxpayers would prefer government hospitals if the government decides to offer quality health services to taxpayers. In that case, non-taxpayers, who are generally poor, might be deprived of inadequate attention that they are getting now in government-run health facilities.
The government is likely to face similar situation in other service delivery areas if it decides to offer certain privileges to the taxpayers.
There are, thus, some risks if the government decides to introduce tax cards without creating necessary facilities for the privileged taxpayers. Then again, frustration among the taxpayers would go further up if the government fails to make available the promised incentives to the taxpayers.
So, the government might consider offering a few incentives to the taxpayers that would not anyway encroach upon the scanty facilities enjoyed by the poorer sections of the society.
In the meanwhile, it should try to create some facilities exclusively for the taxpayers, without giving rise to a sense of discrimination among the citizens who do not have tax-payable incomes.
The proposal to introduce tax cards to help encourage better tax compliance deserves appreciation, no doubt. But the problem of tax evasion is so extensive that it needs more effective solution.
Though the collection of income tax has gone up in recent years, it is still a small amount compared to actual potentials. Without a wholesale reform of the tax administration and effective chasing of the tax evaders by a determined and dedicated group of revenue officials, the government can hardly expect any major improvement in direct tax collection in the near future.
On the top of everything, the people who run the administration do need to be clean as far as their tax payments. Had they been really clean in their annual tax return submission the reform and speed in tax collection would have come automatically.
US President Barack Obama and his wife together have paid $ 1.8 million in taxes to the government. The payment included the tax on Obama's income from two of his best selling recent books. In the USA, the people are informed about the assets their leaders own and the tax they pay every year. Shouldn't the government leaders, politicians of high stature, top businesses and professionals, at least, try to set a few such examples?
Zahidmar10@gmail.com