A leading daily recently reported that around 51 per cent of registered non-government organizations based in Dhaka do not file income tax returns to escape applicable taxes. Only 499 or 50.78 per cent Dhaka-based registered NGOs have filed income tax returns while the remaining 473 NGOs have remained out of tax net. NGOs income from the operation of microcredit activities is exempted from tax but, the tax is applicable on their other income sources like commercial activities, renting out space, and establishments. The ongoing practice is unacceptable for NGOs which run several commercial ventures but those which run on local funds accrued from business should also be exempted from the tax net.
According to NGO Bureau, a total of 2,580 NGOs are running their activities across the country. It is mandatory for NGOs registered with NGO Affairs Bureau to obtain electronic tax-payers’ identification numbers and submission of income tax returns. NGOs are also responsible, as tax deduction authorities, for deducting or collecting income tax at source before making fees and charges to professionals like doctors, royalty or technical know-how fees to professionals or technical service providers, charges to catering service providers, cleaning service, event management, printing service, transport provider and meeting fees, training fees or honorarium.
Deduction authorities have to deposit the source tax to state exchequer and Income Tax Zone-5, Dhaka, which is dedicated to supervise and monitor income tax issues of NGOs based in Dhaka. Officials of the Revenue Board said that the tax office had recently compiled the data of NGOs and found the compliance level of the sector very disappointing. Many of the registered NGOs remained out of tax net depriving the government of due taxes on their income from commercial activities as well as on payment to other professionals and service providing agencies for rendering services. The amount of tax collected from the sector is very low compared with their commercial activities. The NBR received Tk 284.63 crore in the last fiscal year against Tk 132.65 crore in FY2015-2016. But the collection in the first five months of the current FY2017-2018 is only Tk 34.49 crore which is very disappointing.
The sector possesses the huge potential of boosting tax collection as many NGOs have various types of commercial activities like operating banks, constructing skyscrapers, running schools, colleges and universities, holding conferences, and conducting training centers. Revenue collection would increase significantly if the NBR can bring all NGOs under the tax net. The field office of NBR has already initiated a move including preparing a database of NGOs to bring them under the tax net.
It is anticipated that both the parties – NBR and NGOs — would come in a nexus to ensure a win-win situation as the state needs revenue while NGOs are working for the socio-economic development of citizens in general.
