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NBR's sweeping minimum tax |
NBR is mulling to impose Taka 2000 tax on all TIN holders irrespective of their income. I am taken aback by this very idea. Even a man with zero income like me or below the taxable income has to pay this amount if NBR's idea comes into reality. This is unjust and has serious drawbacks.
Unjust in a sense that while unemployed and lower income groups will pay a minimum amount, govt has not yet raised the corporate tax, which was earlier lowered from 21% to 20%. Many defaulters do business as usual with tax payer's money through loan rescheduling and are allowed to invest abroad. However, it is not known how much money they pay as taxes.
NBR may lose more revenues than what it anticipates to achieve. Those with variable income and pay taxes not more than Taka 5000 will prefer to pretend themselves belong to Taka 2000-tax group and those who are planning to obtain TIN next fiscal year will prefer to go off the NBR radar. At the end of the day NBR may find itself on the loser’s side.
There are plenty of ways NBR could augment its revenues:
- NBR could break down TIN holders into two classes: TIN holders with single earning source and TIN holders with multiple earning sources. Many of the latter group try to validate their swollen wealth by introducing multiple sources. In case of astronomical sum they could pay a relatively high tax on the earnings from secondary sources.
- NBR could think of reimposing duties on oil as international prices are coming down. It is a vital source of NBR revenue and a bad idea to downsize it. If oil price touches $130 per barrel in future, then NBR may reconsider removing duties.
- Increase the income tax and other tariffs of quasi-state and private companies that evade regular audit. This one single step will dramatically improve the governance.
- NBR could impose 1 or 2% tax on interest earning of National Savings Certificate. No one will bother much as the revenue earned will be used to finance the interest payment later.
- Since MFS has become increasingly popular for daily transactions, NBR could take a look at the transaction data by delving into operator's server and impose duties on accounts that transact more than Taka 100,000 per month.
Some other ideas I mooted in the piece "VAT Week Resolution", on December 10 ,2022.Sharing parts of it again1:
- Govt uses the VAT money to pay subsidy and other expenses.Though mismanagement in public banks put them into precarious position,govt keeps funding these banks using taxpayer’s money to run operation. On the other hand,duties and taxes on export items are still low. Many exporters do not bring their money back home and pay a very low source tax,1%. Yet they receive regular subsidy.Government should raise the source tax to 2.5% and provide subsidy to export earnings brought back home. Even 0.25% increase in export tax would yield good revenue for the government without compromising the competitiveness of the exportable items.
- Micro entrepreneurs and street vendors fall out of NBR's reach because their businesses do not fall into NBR's VAT category. Meanwhile, extortion from Dhaka streets every year reached Tk 14 billion ,according to an NGO study.NBR could introduce special bonds/tools for them which opens the alley for purchase of bonds worth Tk 100/500 every month/quarter at their own will.Part of the revenue will be used to form crisis fund for them in case of working capital need or bankruptcy.
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In addition, NBR could introduce special gadgets with satellite data link so that road side kiosk and shops could generate VAT included cash receipts and the info could be sent directly to NBR server. We have a communication satellite and we need to make good use of it. Our software developers could develop software for such device and there is no need for foreign firms.
This kind of gadgets without data link already introduced by bus conductors in the name of e-ticketing and squeeze out unreasonable amount from commuters’ pockets. It is interesting to note that those with malevolent intention increasingly hinge on gadgets while govt is shy to introduce them. In local neighborhood shops and groceries, concept of money receipt has become a bygone era thing long ago. To document every transaction this gadget is a must.
Now in Bangladesh we see criminalized neighborhoods with the spread of grey areas in business and other sectors. Introduction of VAT gadgets will create VAT culture at the grassroot level business and decriminalize the neighborhoods with greater transparency and documentation.
It is not right to slap Taka 2000 tax on all TIN holders. This decision is tantamount to mockery with honest taxpayers. Below tax income may be segmented and different layer of minimum taxes could be introduced. For instance, people with income below Taka 100 000 would pay Taka 500 or 0. More than 1 lakh but below 2 lakh would pay Taka 1000.And the others will pay Taka 2000. NBR has plenty of means to augment its revenue earning. I think it would be a wise decision to discard the minimum tax of Taka 2000.
Notes And References
- ”Vat Week Resolution “,Rezaul Hoque,December 10,2022,https://hoquestake.blogspot.com.For more read at https://hoquestake.blogspot.com/2022/12/vat-week-resolution.html?m=1
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©Rezaul Hoque |
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