Widening tax net: Judicious distribution of tax burden

The supplementary budget for the FY 2015-16 and proposed budget for FY 2016-17 will be  placed before parliament in less than a month.  According to the legislative rules and procedure, the supplementary budget will be cleared within a week after it is placed and the proposed national budget will be passed by  parliament by June 30 for the 'assent' of the President of the Republic. Constitutionally, the budget in Bangladesh is a document that should be recommended by the President for its placing before the parliament and finally it must have his assent. In particular, the tabling of the supplementary budget and its passage have got a very specific provision like
"91. If in respect of any financial year it is found -
(a) that the amount authorised to be expended for a particular service for the current financial year is insufficient or that a need has arisen for expenditure upon some new service not included in the annual financial statement for that year; or
(b) that any money has been spent on a service during a financial year in excess of the amount granted for that service for that year;
the President shall have power to authorise expenditure from the Consolidated Fund whether or not it is charged by or under the Constitution upon that Fund and shall cause to be laid before Parliament a supplementary financial statement setting out the estimated amount of the expenditure or, as the case may be, an excess financial statement setting out the amount of the excess, and the provisions of articles 87 to 90 shall (with the necessary adaptations) apply in relation to those statements as they apply in relation to the annual financial statement."
And in line with the quoted constitutional spirit, the Rules of Procedure of the Bangladesh parliament has the provisions like "123. Supplementary, excess and exceptional grants and votes of credit:
"Supplementary, excess and exceptional grants and votes of credit shall be regulated by the same procedure as is applicable in the case of demands for grants subject to such adaptations, whether by way of modification, addition or omission, as the Speaker may deem necessary or expedient."
124. Scope of discussion on supplementary grants of the Rules of Procedure provides:
"The debate on the supplementary grants shall be confined to the items constituting the same and no discussion may be raised on the original grants nor policy underlying them save in so far as it may be necessary to explain or illustrate the particular items under discussion."
Under this guidance, there is seldom any detailed discussion or debate on the supplementary budget placed in parliament. It is cleared by the legislature mostly within next week of its placement. Traditionally in this part of our world, the budget is prepared by the Ministry of Finance, only to be endorsed by parliament without significant scrutiny and to be implemented by different ministries and agencies of the government with not much adherence as it is not proposed by them and again the parliament passes the supplementary budget in a smooth way. The budget, apart from an outline of strategic plan and roadmap for development and non-development fiscal measures, is a fundamental memorandum of understanding between the citizens and the government and both are legally bound to each other for its proper implementation. Both the government and the citizens are represented in parliament by the elected representatives.
The Bangladesh Constitution has a clear  condition that "83. No tax shall be levied or collected except by or under the authority of an Act of parliament."  So parliament must endorse the new or revisions made in the tax policies during the current financial year other than which were passed by parliament while adopting the Finance Bill 2015.
In the budget under implementation, the revenue collection target were fixed at Tk. 2,087.70 billion in which the share of the National Board of Revenue (NBR) was Tk. 1,763.70 billion. The revenue collection target was indeed ambitious since it was 30.62 per cent higher than that of the previous financial year (2014-15). Corporate Tax rates were reduced, viz, tax slabs were raised to a new level with not so many new measures. This time the NBR has had to face heavy challenge of achieving the target which was revised recently to Tk 1,500 billion. However, the ratio of contribution from non-NBR revenues was decreased enormously during the last two financial years. It has given a soft target in the current year too. Non-NBR revenues are to come from public sector corporations, service organisations and enterprises running commercially. More accountability has to be ensured in the SoEs (state-owned enterprises) financial functionaries. As they have eaten up most of the foreign aid money for their development, they must pay back to the government in terms of SLA repayment.        
Effective initiatives are to be taken to make direct tax as the principal source of revenue with a view to ensuring socio-economic development and a society based on equity and justice through removal of social disparity. Such initiatives are to be implemented to bring about a principle of equity in overall economic landscape. In the forthcoming budget, along with enhancing investment and employment opportunities, multifarious initiatives should be  taken to widen the tax net. Stocktaking of implementation of initiatives announced earlier fiscal years have to be evaluated. It may not yield good dividend.
Bangladesh's tax system needs to be a reflection of our socio-economic and cultural values rather than the values of the decision- makers. To create a system of taxation, a country must make choices regarding distribution of the tax burden-who will pay taxes and how much they will pay-and how the taxes collected will be spent.
The writer is a former Secretary to the government
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