Bangladesh could significantly boost its revenue to $167 billion and its GDP ratio by 16% by the fiscal year 2030 through the sustained digitalization of its taxation system, according to the Centre for Policy Dialogue (CPD).
Investing just Tk0.25 in digitalizing the National Board of Revenue (NBR) could yield an additional Tk100 in revenue. The NBR is uniquely positioned to generate substantial returns from minimal investment. Consequently, the government is urged to prioritize the digitalization of the NBR.
The CPD, in collaboration with the European Union (EU), organized a dialogue titled "Digitalisation of the Taxation System in Bangladesh: The Next Frontier" on Sunday.
Mustafizur Rahman, a distinguished fellow at CPD, presented the keynote address. He emphasized that digitalization could significantly improve Bangladesh's domestic revenue mobilization (DRM) compared to the current approach.
Rahman noted: "Our estimates indicate that digitalization can help Bangladesh increase DRM significantly compared to the business-as-usual scenario. Through proper digitalization of the taxation system, Bangladesh could gradually enhance revenue mobilization to $167 billion by 2030."
He also pointed out that while the government has ambitious plans, implementation is lacking. "If the government could meet its revenue targets, it would not need to borrow a single penny from any source to implement the Annual Development Programme (ADP)," Rahman said.
Currently, Bangladesh has one of the lowest revenue-to-GDP ratios in South Asia, and its public expenditure-to-GDP ratio is the lowest in the region, Rahman added.
Although technology cannot solve all the problems, it would help address the low tax to GDP ratio.
In their presentation CPD showed that Bangladesh's revenue-GDP ratio has indeed somewhat come down in recent years – from 10.99% in FY 2010 to 10.36% in FY 2021 to 8.26% in FY 2023.
The target for FY 2024, set at 9.9% is also unlikely to be achieved. At a time when GDP growth rates were robust, averaging more than 6.5% per annum revenue has not been able to post a rise in tandem.
To recall, in the 7th Five-Year Plan (2015-2020), the target for domestic revenue mobilization was set at 16% of GDP, and the public expenditure was set at 21.1% of GDP for the year 2020 (with the budget deficit remaining equivalent to about 5.% of the GDP). Four years on, we are far off from those targets.
If and when this plan is fully implemented, Bangladesh's move towards digitisation of the Taxation System will have reached a significant milestone.
CPD suggested that Bangladesh may think of introducing a system such as Adhar in India. Adhar is a 12-digit unique number which is required to open Bank account, get government subsidies, and access many other services (e.g. air travel). It is mandatory to submit the Adhar number while submitting tax (along with the PAN for tax purposes).
This allows the tax authorities to reconcile expenditures incurred with the information in the income tax form submitted by the taxpayer.
This helps tax authorities to address tax avoidance and tax evasion by verifying tax payable through expenditure information and detect tax evasion. NID could serve as the pertinent number in this regard.
Abu Hena Md Rahmatul Muneem, chairman of the National Board of Revenue (NBR), was present as guest of honour.
NBR chairman also presented a presentation at the event.
He said budget targets are set higher every year without taking into account real growth and NBR’s capacity. As a result, many innovative ideas remained underutilized.
In his presentation, he said, NBR wants to bring 1.4 crore people under the tax net. However, only 41.45 lakh people have filed tax returns so far against one crore tin holders.
Debapriya Bhattacharya, a distinguished fellow of the CPD, thinks that potential taxpayers usually want to pay taxes when they see transparency in government spending.
They expect quality spending on education, health, social safety programs etc. If the government cannot bring quality public expenditure, automation will not yield any results.
“However, the government should have a political will to reduce capital flight. The people who don't pay taxes and are involved in capital flight, they are very powerful in business, politically and financially,” he added.
He added saying, the government must ensure protection for NBR.
Kazi Nabil Ahmed, chairman, Parliamentary Standing Committee on the Ministry of Posts, Telecommunications & Information Technology said: “The goal of Digital Bangladesh by 2021 has been to succeed. This time the prime minister's next goal is Smart Bangladesh, to fulfill that we also need to digitize our whole taxation system.
He believes that taxation has a target of ensuring social justice. If that is done, the revenue will increase.
However, at the same time, he highlighted data safety.
Waseqa Ayesha Khan, state minister, Ministry of Finance, said: “In today's discussion, the topic of creating a cashless society is being discussed. But the question is, "If big businesses prefer cash transactions, then how can we become a cashless economy?”
Enrico Lorenzon, team leader – Inclusive Governance, Delegation of the European Union to Bangladesh and Fahmida Khatun, Executive Director, CPD, also spoke at the event.