Along with having the lowest tax-to-GDP ratio, Bangladesh also has the lowest rate of taxpayer return submissions compared to other South Asian nations including India, Nepal, Pakistan, Bhutan, and Sri Lanka.
In Bangladesh the percentage of tax return submission is only 31%, whereas in India, Nepal, Pakistan, Bhutan and Sri Lanka this percentage is 71%, 72%, 33%, 44% and 88% respectively, according to a keynote presentation given by Snehasish Barua an Income Tax law expert on a seminar titled “100 years of Income Tax Law of Bangladesh – Expectations and Achievements”.
International Business Forum of Bangladesh (IBFB) hosted the seminar on November 26.
The speakers in the seminar underscored the need for simplifying tax laws and acts.
The discussion suggested that the government should have friendly approaches in collecting tax.
Regarding the taxpayers' attitude they said: “To pay tax is the holy duty of the people for the welfare of the state and we should build the habit of paying tax on a regular basis.”
As the chief guest at the seminar, Planning Minister M A Mannan said: “Paying tax is mandatory for running the state and we all should come forward to make this happen. A wide range of discussion in reforming outdated tax laws is a timely demand and the discussion should not be stopped.”
“Because, if revenue earnings are not increased as expected, the people's expectations will not come true. In order to increase tax payers, the wall between the National Board of Revenue and the taxpayers should come down.”
“Dialogue and discussions are badly needed to solve state-related problems, '' the minister said, adding that it is possible to overcome fiscal-related obstacles through dialogue. “The owner of the state is the people and the assistance should come from them in solving fiscal-related problems.”
Regarding the tax exemption, the minister noted that: “Tax exemption practice should be abolished right now for the greater interest of the country. The reason for the tax exemption practice is on the rise in the country is totally unknown to me.”
Legal economist and Adviser to Bangladesh Competition Commission MS Siddiqui said: “Our taxation system remains in the 100 years old Zamindari or East India company's style of British origin. Therefore, a major reform of this 100-year-old tax law becomes necessary.”
“Moreover, even though the government told us to encourage SMEs (Small and Medium Enterprise), it is not happening at present. Because according to our tax law, if you buy products from a small SME company, you have to pay 25% tax, but big companies produce those products by themselves, then the tax rate comes down to only 5%.”
Bangladesh is still practicing injustice in tax affairs. Tax collection method is not improved. In absence of dynamism in tax law, to increase tax to GDP ratio is impossible.”
Former NBR Chairman Dr Muhammad Abdul Majid said: “The economy will see no discrimination if prudential tax law is introduced. We have to be responsible in paying tax for the wellbeing of the state.”
Earlier in his keynote presentation, regarding the principle shift of income tax law and its major outcome, Snehasish said: “To replenish the revenue deficit caused by the Sepoy Mutiny of 1857 the Tax law was introduced for the first time in Indian Subcontinent by Sir James Wilson as ‘Income Tax Act 1860'. At that time Income was divided into four heads: Landed property, Professions and Trade, Securities, Salaries and Pensions.”
In the way of law formulation, Income Tax Act 1886 Income was divided into four heads and taxed separately. Then in the Income Tax Act 1918, income was divided into six heads and taxed separately.
For the first time, it gave specific nomenclature of Income-tax authorities and organizational history of income-tax authorities starting in 1922.
In 1939, slab rates were introduced for the first time to split income into slabs and progressive higher tax rates were charged on successive slabs of income.
After partition in 1947, both the governments of India and Pakistan adopted the Income Tax Act 1922.
In 1960, the fiscal year was changed to commence on July 1 and end on June 30. Previously, it used to start on April 1 and ended on March 31.
In 1965 the self-assessment scheme was introduced, previously, an assessment officer used to assess the income of a person.
After the independence of Bangladesh in 1971, income tax was made effective under the Income Tax Act 1922. Then in 1972, NBR was established under President's order 76.
The first effective formulation came in 1976, a commission was formed when the necessity to make the regulation pragmatic had been felt.
Finally, in 1984 Income Tax Act 1922 was replaced by a new legislation named Income Tax Ordinance 1984 (ITO) and Income Tax Rules 1984 with seven heads of income.
IBFB president Humayun Rashid, managing director and CEO, Energypac Power Generation Ltd was also present as the chairperson of the seminar.
However, among others, AF Hassan Ariff, former attorney general and former advisor of Caretaker Government, Hafizur Rahman Khan, immediate past president, IBFB and Lutfunnisa Saudia Khan, vice-president Finance, IBFB spoke at the event.
Registered taxpayers hit 7.8 million by the end of FY22, up 22% from 6.4 million a year ago, according to NBR data.