Bangladesh has the lowest tax GDP ratio in South Asia

Income tax return and tax GDP ratio have not increased as the number of registered taxpayers increased in Bangladesh.

According to the information given by the National Board of Revenue (NBR) after the end of the income tax fair on January 2, the number of taxpayers who have given their returns in FY22 was only 2.3 million. 

But the latest NBR data says that Bangladesh has the second-highest number of registered taxpayers in South Asia after India. 

According to the NBR data, the number of people with Tax Identification Number (TIN) in the country is now 7.4 million. 

According to the Central Board of Direct Taxes (CBDT) of India, nearly 5.89 crore Income Tax Returns (ITRs) have been filed by the Income Tax Department as of December 31, 2021. But according to a Times of India report, the total number of taxpayers for AY (Assessment year) 2020-21 is 82.28 million.

According to the websites of other countries, Besides India, 2.5 million taxpayers in Pakistan, 1.5 million in Sri Lanka, 2.2 million in Nepal and 88 thousand in Bhutan filed their income tax returns.

Meanwhile, economists and the concerned individuals are not satisfied at all with the reduction in tax collection and minimum tax GDP ratio among South Asian countries against the increasing number of TIN holders.

Following the shift to a new base year for GDP calculations, Bangladesh's tax-to-GDP ratio has further dropped to 7.7%, the lowest among all South Asian nations.

Dr Ahsan H Mansur, executive director of the Policy Research Institute (PRI), told Dhaka Tribune earlier: “The tax to GDP ratio in Bangladesh should be 18-20%, but it is still stuck at 7.7%, and it won’t grow much this year either.”

This forces the government to look to other sources or loans to fund development goals, the economist further said. 

Explaining why NBR keeps failing to meet its revenue targets so often, and hence the low tax to GDP ratio, Mansur said that this is because of two reasons — one is an ancient law and infrastructure worsened by the lack of digitisation, and another is setting unrealistic goals for the revenue board.

According to data from the April 2021 issue of the World Economic Outlook, the tax to GDP ratio of the country has been 9.9% on an average since 2016-2020, while it is 19.67% for India, 21.50% for Nepal, 14.88% for Pakistan and 12.74% for Sri Lanka.

The ratio is 24.72% for developing countries and 35.81% for developed countries, according to the data.

The tax-to-GDP ratio is a ratio of a nation's tax revenue relative to its gross domestic product, the value of goods and services produced in a country during a certain period. The ratio is also a marker of how well the government controls a country's economic resources.

According to an official document, the tax to GDP ratio in the current fiscal has been estimated at 10.7%. 

The National Board of Revenue (NBR) has intensified its tax survey, inspection, monitoring, and realization to boost the tax GDP ratio.

Regarding tax return percentage and tax GDP ratio, an NBR official told: “The board has already directed all the field offices to intensify and strengthen their respective tax survey to have a justified growth with other wings. The eligible but not enlisted persons will be given an electronic tax identification number (e-TIN) instantly. NBR has directed the tax commissioners to bring all eligible persons and organizations under the tax net and take initiative to remove the phobia regarding tax payment.”

According to the National Board of Revenue (NBR), in FY22, taxpayers who have filed last year’s tax return have deposited Tk3,281 crore in state coffers, which is Tk729 crore less in comparison to the previous fiscal year.

During that year, the amount of tax return was Tk4,010 crore.

Abdul Khaleq (pseudonym) is a former official of a government bank. He retired six years ago. At that time, he was getting a fairly good salary. So, he used to pay regular taxes. Now he has no income and lives with his son's family. However, he still has to file an income tax return every year. Because he has a Tax Identification Number (e-TIN). Even in Covid-19, he had to file the return taking health risk.

He told Dhaka Tribune: "Since I have had no income for several years, I wanted to cancel my e-TIN. But I can't. According to the NBR, there is no scope for cancellation of TIN in the Income Tax Ordinance. Why do I have to submit zero returns every year when I have no income?”

According to the NBR, there is no clause in the current Income Tax Ordinance regarding the cancellation or suspension of TIN. So, once you take TIN, you will have to submit a return with details of income and expenditure every year for the rest of your life. Even if there is no fixed amount of taxable income, you will not be exempted. Even if you don't earn a single penny year after year, you still have to submit a return. 

Moreover, there is ambiguity in the income tax ordinance about who will file the return. On one hand, all TIN holders have to submit a return. On the other hand, it is being said that special TIN holders must submit a return. 

There is no clear explanation about who will file the tax return in the Income Tax Ordinance. 

A couple of years ago, it was made mandatory for all 12 digit e-TIN holders to submit their returns. 

But the Income Tax Ordinance has again stated that in addition, it is mandatory to file returns of 36 more categories of TIN holders such as company directors, elite club members, car owners, trade license holders, business organization members, contractors, homeowners, investors investing more than Tk2 lakh in savings certificates etc.