They also suggest the Revenue Board must emphasize robust digital infrastructure to widen the value added tax (VAT) and Tax net
Amid the slowdown in economic activities due to the coronavirus pandemic, noted economists suggest the government must be more imaginative and tactful to get close to meeting the ambitious target of revenue collection set for the current fiscal.
They also suggested the National Board of Revenue (NBR) must emphasise robust digital infrastructure to broaden the value added tax (VAT) and Tax net.
The government needs to root out endemic corruption in its tax system, enforce better tax compliance and simplify the indirect and direct tax systems, they added.
Digital connectivity is increasingly vital and entire economies are acutely dependent on digital infrastructure. The lack of digital infrastructure however is preventing developing countries from realising their own enormous economic potential.
The experts also added that the technological advances will help to find easy solutions for different problems as the country has already started adopting solutions.
However, broadening the VAT base and narrowing the scope of reduced rates can help to stabilise consumption tax revenues during economic downturns.
According to the NBR data, the overall revenue collection came down by 22.07 percent to only Tk123.34 billion in July 2020 compared to the same month in 2019, when NBR had collected Tk158.28 billion in revenue.
The collection of VAT dropped by 39.56 percent to Tk37.35 billion in July as compared to the corresponding month of the last FY. Besides, the income tax wing collected Tk36.70 billion against its monthly target of Tk42.19 billion, posting a negative growth of 15.54 percent, NBR data showed.
The government has set a revenue collection target of Tk378,000 crore for 2020-21 fiscal year. Of the amount, NBR has been tasked with realising a revenue collection target of Tk330,000 crore, the non-NBR revenue collection target is Tk15,000 crore, while the non-tax revenue collection goal is Tk33,000 crore.
Talking to UNB, former caretaker government finance adviser Dr AB Mirza Azizul Islam suggested the government to strengthen activities to widen the tax net for the sake of the country’s economy recovery hit by Covid-19 pandemic.
“Proper survey is needed to find who don’t pay income taxes. The government has to take action against the tax evaders and continue the culture of punishment,” he also said.
The noted economist said online facility can be easier to collect VAT and Taxes. It should be accelerated as much as possible.
“The officials of NBR must be more proactive to serve better in the sectors. The accountability should be ensured in this regard. Then, revenue collection will go up,” Dr Mirza Azizul also said.
Dr Mohammad Mahfuz Kabir, research director at Bangladesh Institute of International and Strategic Studies (BIISS) said the new VAT law should be implemented to broaden its net but he acknowledged that it’s a very challenging job.
“The NBR should encourage businessmen so that the traders install Electronic Fiscal Device (EFD) willingly in their shops. To succeed, the government can waive the money to purchase the devices to encourage the businesses during the coronavirus pandemic period. The NBR officials should discuss with business communities to this end,” he also said.
The economist suggested NBR can give a chance to the coronavirus-affected businesses to pay VAT and Tax in instalments.
“The EFD system will be helpful to bring the VAT evaders under a net. NBR has to begin the activities properly. The institution should make it easier to pay individual and corporate taxes online. So the target of revenue collection will somewhat fulfill, otherwise businesses will evade VAT and taxes more using the excuse of Covid-19,” Dr Mahfuz added.
Contacted, Dr Masrur Reaz, chairman of Policy Exchange, Bangladesh said the country’s economic growth will be low over the next six months due to Covid-19.
“Economy's wheels run slowly when revenue collection from VAT and Tax is low. So we have to think of alternatives instead of attaining the ambitious goal of the current budget. A timely tax policy is needed,” he also said.
Dr Reaz said Bangladesh must increase its tax net as the country’s tax-to-GDP ratio is low compared to other South Asian countries.
“NBR should increase the holding tax. Besides, income tax should be automated. Actually, digitalization and accountability are very significant to collect revenues more nowadays,” the economist also said.
He added the government formed a VAT law. But it has not properly implemented it. “The VAT law must be implemented. Besides, VAT pressure on SME sector should be reduced to broaden its net. So, the government should be more strategic taking short and long term policies,” he added.
The government took the VAT Online Project (VOP) in 2013 to implement the VAT and Supplementary Duty Act 2012 to end the manual system.
NBR sources said they formed a high-powered taskforce to bring all registered public and private limited companies under the tax net, to ensure submission of income tax returns and prevent submission of fake audit reports as it found that over 56 percent of the firms did not have taxpayers’ identification numbers (TIN). The taskforce will work to ensure proper revenue collection from the corporate entities and bring discipline in the sector.
NBR chairman Abu Hena Md Rahmatul Muneem said they inaugurated the installation of EFD in 100 business entities from the NBR conference room virtually on Tuesday. Of them, 80 EFD will be installed in Dhaka, (40 machines each for Dhaka North and South city corporations) and 20 machines for Chattogram.
This is a pilot project and it will be continued for next two weeks. After successfully running this project some 10,000 EFDs will be installed at the initial stage. All machines will be imported from China. Later, 5 lakh machines will be installed throughout the country in phases, he added.
“There is no remarkable response of this amnesty in the tax return so far, [after the deadline of income tax return submission] we will be able to see how much untaxed money is invested in the capital market,” Muneem added.
He said that to stop the anomalies in the VAT collection the NBR has introduced this device. “By this the hassle of the businessmen will be reduced, expenditure in revenue collection and doing business will be lessened, there will be no scope for tax evasion,” Muneem said.
The chairman mentioned that in the next three months 1000 more EFDs will be installed while 100,000 EFDs will be there by the next June.
“Telephone numbers of the consumers will be stored with the NBR. After a specific time there will be lottery and selected consumers will be given Tk50,000 to Tk100,000,” he further added.
Talking about the government’s plan to expand the tax net, earlier, Finance Minister AHM Mustafa Kamal said the income tax offices will be opened in all upazilas across the country and the NBR has already been asked to formulate a project in this regard.
“If such offices are set up at the upazila level, then the common people will feel encouraged to pay taxes. I think we’ll be able to achieve the revenue collection target as we’ll bring all the eligible people under the tax net,” the minister also said.