Where have potential taxpayers gone?

Tax fairs and surveys designed to rope in new tax payers have been regular events in recent times. The National Board of Revenue (NBR) does spend a lot of time and resources on those every year.
But the ultimate outcome of the NBR initiatives has remained rather disappointing until now.
The net results of the surveys that were carried out recently to identify new and potential taxpayers have been most frustrating, in terms of adding new names to the existing list of actual taxpayers.
There was no dearth of opening of new tax files during the surveys that were conducted between 2009 and 2012. Nearly 550,000 new tax files were opened during the period. But not many of them who had earlier opened their tax files did submit their annual returns later.
The number of tax returns that were submitted between 2009 and 2012, according to a report published on Monday's issue of The Financial Express, remained almost stagnant between 0.8 million and 1.0 million.
This year, too, the number of returns submitted until November 30 last, the extended deadline, was little over 0.8 million. Since many taxpayers have submitted prayers for extension of time for filing their annual tax returns, the number of tax returnees would, in all likelihood, finally stick to the old figure of 1.0 million.  
Such a stagnant situation concerning the number of taxpayers is bound to evoke surprise and worries.
The economy has been growing at an average rate of over 6.0 per cent annually. This growth rate indicates increased economic activities, being spurred by rise in both export-oriented and domestic demand-led ones.
More and more entrepreneurs have entered the market and more and more people -- educated, half-educated and uneducated -- got employment. If not all, at least a sizeable number of them have taxable income. But where are they?
It is generally believed that fixed income earners or salaried personnel having taxable income, in most cases, pay taxes. The employers of the organised sectors of the economy usually see to it that their employees remain tax-compliant.
The rate of tax evasion is usually very high among the businesses. Scores of businesses -- small and medium ones -- do not have tax-identification numbers (TINs). And many others, despite having TINs, avoid submission of tax returns.
Similarly, high-income professionals do submit tax returns. Many of them, allegedly, pay taxes well below the actual amount that is otherwise due. But there are thousands of professionals such as doctors, engineers and lawyers who do not file tax returns.
Many potential taxpayers from amongst the businessmen and professionals must have been identified by the NBR survey teams between 2009 and 2012. These people had opened tax files. But a good number of them did not submit tax returns.
It seems that there was no follow-up work on the part of NBR to ensure that these potential taxpayers comply with the rules for submission of annual tax returns. The reasons cited by the NBR people for this 'gross' failure include lack of coordination among various departments and non-deployment of officials with the specific job of monitoring the surveyed taxpayers at the field level.
Despite the number of taxpayers remaining almost unchanged, the income tax revenue has recorded a respectable increase in recent years. This could be due to the rise in profit earnings by the corporate sector and expansion of the AIT (advance income tax) at source. The taxmen tend to show this increase in tax revenue as their success.
Undeniably, it is hard to eliminate the influence of graft in the taxation system of a country where the vice is systemic. But that does not anyway limit the scope for roping in more tax payers and extract a substantial volume of income tax-related revenues from them.
It sounds ridiculous that a country with a population of about 160 million has only 1.0 million taxpayers. In fact, the number of people with taxable income should have been more than 10 million, given the number of those among the rich and the middle income group.  
Bangladesh has been confronting two basic problems as far as taxation is concerned, the first one being avoidance of tax payment and the second, tax evasion. The lax tax administration remains to be the principal cause behind the persistence of both the problems.
The detection of tax evasion remains a continuous problem. But the job of bringing in more and more people under tax net should get top-most priority.
The NBR, on its part, should do the needful to achieve the objective. There should be a separate wing to monitor and ensure the submission of annual tax returns by people identified as potential taxpayers by the survey teams. And the government does need to put in place some tangible benefits for the taxpayers who are not willing to pay tax for the sustenance of an inefficient and corrupt bureaucracy or wasting funds on low-priority development projects, most of which are taken up for implementation on pure political consideration and not on the basis of any sound economic rationale.  
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