A F Nesaruddin, FCA :
Like any other country, tax is the main source of government revenue in Bangladesh. Three major taxes of Bangladesh are customs duty, income tax and VAT (Value added tax). All these taxes are administered by the National Board of Revenue (NBR) in Bangladesh. Out of these three, only income tax is treated as a direct tax. Both customs duty and VAT are categorized as indirect tax; although in many countries, VAT is considered as a direct tax. For a long time, customs duty was the single largest contributor to our tax revenue. But recently, there has been notable change in the composition of our revenue collection. Contribution of customs duty is gradually on the decline. It is largely due to trade liberalisation and re-structuring of import duties following WTO guidelines. On the other hand, contribution of income tax is steadily on the rise. During the 1990s, income tax was contributing around 20% of NBR’s total collection. Even in financial year 2010-2011, its contribution was less than 30%. But in 2013-2014, income tax had contributed 36% of tax revenue while contribution of customs duty had declined to 28%. In the budget proposals for 2014-2015, income tax is treated as the single largest contributor of tax revenue. Out of the total collection target of Tk. 149,720 crore, income tax is projected to collect 38.4%, VAT 37.7% and customs 23.9%. During last few years, the quantum of collection from income tax, in absolute terms also, has increased significantly. During financial year 2010-2011 total collection from income tax was Tk. 23,011 crore whereas during financial year 2013-2014, it rose to Tk. 42,916 crore. In fact, the government has been making constant efforts to attain a position where income tax would become the main source for collection of tax revenue in Bangladesh. In the present discussion our focus will be mainly on various aspects of income tax in Bangladesh. In recent years, the government has taken several policy decisions and timely steps with regard to tax laws and tax administration which deserve appreciation.Introduction of universal self assessment has brought significant relief to tax payers, particularly small tax payers. Now, after filing the return they do not need to go through the hassle of appearance and hearing before the DCT for assessment unless the case is picked up for audit. And, in fact, not more than 5 to 10 per cent of the returns are selected for audit. Small and fixed-income tax payers are normally kept out of audit.The income tax department has undergone a large scale expansion in 2012. Number of tax circles has been more than doubled covering many smaller towns. Consequently, tax offices have been more easily accessible and tax payer services more easily available to tax payers. The government is also taking other steps to increase tax payer awareness. “Income Tax Day” is observed all over the country on 15 September every year. Colorful rallies are brought out and other events held to mark the day. And then the income Tax Fair is held from 16 to 22 September where direct assistance is given to the tax payers for filling up and submitting tax returns. These obviously generate notable awareness and encouragement among tax payers. During this period both print and electronic media play a very positive and supportive role. They give wide coverage to the events during the whole week and air discussions/talk shows on various issues related to income tax.The government has also set up tax payer information and service centres in all major cities of the country. They provide necessary service to the tax payers throughout the year. Award of CIP (Commercially Important Persons) status to 10 individuals and 10 corporate tax payers each year on national level is in practice over last several years. In addition, 3 top tax payers and 3 longest time tax payers are given recognition at district level through formal presentation of a crest and a certificate. Another tax payer friendly move was introduced in 2013, encouraging the on-line registration (e-TIN) system for tax payers. This has been welcomed in every circle. Another project for on-line submission and processing of tax returns is now under way. It is expected to be operative by the middle of 2016.In every country sometimes tax measures are used to achieve social objectives. In recent years several such measures have been taken by the government. Tax rebate @ 10% on investment in specified fields of Corporate Social Responsibility (CSR) is an important measure in this direction. Tax rebate is also allowed for donations/assistance given to specified national level organisations engaged in various social welfare activities. Moreover, tax exemption for infrastructure facilities, SME, software development or IT enable services, poultry farming and certain other economic activities are allowed on the basis of socio-economic considerations. These measures definitely have a positive impact on our society directly or indirectly. We have so far discussed some positive and encouraging features of our tax administration. But naturally there are some limitations and bottlenecks also in our taxation system. We shall now try to throw some light on them.Bangladesh has a very narrow tax base. It has a population of more than 16 crore, but the number of regular tax payers is around 10 lakh only. It is generally admitted that the number of potential tax payers in Bangladesh would be much higher than 10 lakhs. Somehow a large portion of these potential tax payers are outside the tax net. NBR has to take effective measures to improve this situation. Main focus would be to inspire and motivate potential tax payers to declare their true income and file tax returns. The media can also make a positive contribution in this regard by assisting NBR to reach its message to the people. Tax rates in Bangladesh are quite high compared to other countries of the region. Corporate tax rates vary from 27.5% to 45% depending on the type of the company. In case of individualss the highest tax rate is 30%. And if the tax payer is liable to pay wealth surcharge (having net wealth of more than Taka 2 crore) then his effective tax rate can go up to 37.5%. Such high tax rate discourages tax payers and increases their tendency for tax evasions and desire to remain outside the tax net. This is certainly not a desirable situation for any tax administration. So, NBR should seriously consider rationalising our tax structure in order to come out of this situation.We shall now discuss a few issues that are related with the actual process of assessment in tax offices and concern the tax payers directly.Our tax law provides that any return filed under Universal Self Assessment may be selected for audit according to guidelines given by the NBR. In practice, audit cases are actually selected by the circle (DCT) and approved by the higher authorities. In this selection process, tax officers are often arbitrary and are guided by subjective considerations. This often causes unnecessary harassment to the tax payers. And ultimately this does not help in tax collection. The NBR should give realistic and useful guidelines for selection of audit cases and enforce close monitoring to ensure that tax officials do not misuse power of selecting the files and auditing thereof.At the time of assessment the DCTs always make substantial disallowances from claimed genuine business expenses in an arbitrary manner without showing any valid ground for the disallowances. This directly causes harassment to the tax payers. In most cases, necessary and lawfull relief cannot be availed in Appeal or Tribunal also.It is often found that DCTs attach bank accounts for collection of demanded tax ignoring the fact that the demand is under appeal; or even without serving the demand notice properly. This causes great inconvenience and harassment to the assessee. There should be strict administrative monitoring to prevent such reckless and unlawful acts by the DCT.Approval of assessment orders by the IJCT/CT is not a requirement of law in any way. But in actual practice, it is found that the IJCT/CT, routinely takes tax files of their scrutiny and approval. Selections of the files are often according to their own choice. This is totally unnecessary and undesirable. And this also delays the process of assessment and causes additional harassment to tax payers. The NBR should introduce strong monitoring to ensure that approval by IJCT and CT is done only under NBR’s given guidelines.It is true that over the last few years we have attained significant progress in many areas of tax-administration, particularly with regard to tax collection. But, as noted above, there are also many areas where improvement is urgently called for. This is primarily a responsibility of the National Board of Revenue. But as conscious citizens of the country we all have the moral responsibility to perform our roles in this regard with sincerity and honesty. Tax payers in particular should act with sincerity and responsibility regarding compliance with tax laws. Tax officials on the other hand must give due respect and recognition to tax payers so that they do not feel harassed or wronged. Tax officials must always bear in mind that their attitude towards tax payers should be friendly and helpful. Media, both print and electronic, now plays quite a significant role in almost every sphere of our social life. Therefore, media can also play an effective role on this issue by generating awareness and sense of responsibility among tax payers and a sense of equity and fairness among tax officials. We all want to see an efficient, effective and tax payer friendly tax administration in Bangladesh.(The writer is practicing Chartered Accountant and a Partner of HodaVasiChowdhury & Co)
