New Tax Act And eReturn System

Well spelt,easy eReturn system Could resolve govt's revenue problem.

Bangladesh has introduced new Income Tax Act(2023) this year. As online tax return submission---scheduled to be ended in November 30 or extended to December –has started, I leafed through the new income tax act. There is some interesting discovery for me. But first, let’s start with the experience I have with the online e-Return system.

The introduction of the system witnessed record number of people come under tax net in the last couple of years. It is a commendable job as NBR managed to complete /install the online system after a Vietnamese company left in the middle of the job. I submitted my zero tax return, but there are some issues that I cannot help raising:

1. The online return system is in English. If it were in Bangla, a large number of Bangladeshis would feel encouraged to use it. Compared to print version, online return system is elaborated and thoroughly explained.

2. This year NBR introduced Single page return for those with income less than taka 500,000 or wealth less than taka 40,00,000. Single page return still needs lots of clarification. For instance, total assets,expenditure, net wealth,source of income needs to be defined for TIN holders submitting their 2nd or 3rd return. Like detail return,explanation could be introduced here.

3. Current set up of the online system does not allow uploading of scanned copies of documents. Addressing the issue will encourage more people to use the system.

4. Using the system with smartphone is still difficult. It is hard to save documents on mobile phone.

5. Respective data field under expenditure, asset etc sections should be flexible and incorporate options to upload required documents.

The good thing about the new tax act is that it allows eReturn submission, zero tax on SMEs operated by women,zero tax on economic activities of indigenous people in CHT, tax waiver on startups.

However, what I found interesting is that no tax on religious charities or Bangla-medium educational institutions. Governance in these institutions is very weak. On top of that governing body constitutes of stakeholders from different creed who do not perform as per the wishes of students and parents. Making them tax free only complicates/enhances the decaying situation. Many undertake various construction/development works using the institution fund, furnishing no explanation whatsoever on how the money was spent. Imposing tax will improve the situation.

NBR allows tax exemption for startups that incur loss during growth years. In the finance act, we see investment of opaque capital is allowed in ICT sector like the real-estate. However, dismal conditions of e-commerce industry and recent closure of PaperFly does not offer much room for optimism. Meanwhile, SMEs which have to pay interest on average around 20% and are doing well in the face of odds. In terms of value addition, SMEs add more values than the ICT but do not get much attention from the NBR. Some reports say $1 billion of the previous fiscal year went missing from our export earnings. This year $7/8 billion of export proceeds have not arrived yet. Economists like Rehman Sobhan fears hundiwalas might store the money to exploit the situation in future. As govt offers cash incentives to freelancers and IT firms,evil quarters may steal the money wearing IT sector’s boots and adding no value to the economy. NBR should come up with ideas how to address the issues.

Tax act is not clear about tobacco tariff. One Parliament member in the last budget session correctly pointed out that govt imposed duty on profits from tobacco goods but not on sale. Sales duty on tobacco will augment revenue, which is now falling short of IMF target. Govt did increase the duty on profits but did not lend ear to the advice.

I have also noticed that it is difficult to verify online return submission of TIN with ten-digit. Online verification of return submission should be made easy.

Some YouTubers did tremendous help to govt by launching videos on how to submit tax return. I submitted my zero tax return watching such videos. I think NBR should take the initiative to create and disseminate such educational videos to dispel any ambiguity in submitting return. Similar videos can be created to submit VAT return. NBR's job is not only to identify taxpayers but also includes educating the taxpayers. If step-by-step process in filling the tax return is spelt ,more people will be encouraged to submit tax return. In addition ,NBR could also host a frequently asked questions (FAQ) section on its website to respond to some common queries.

Making TIN registration and return submission easy, many unintended consequences could be avoided. Often some quarters open deposit scheme in the banks or purchase savings certificates using fake id. It is also reported in the news many took bank loans of astronomical sum using other people's id while keeping them in the dark. Similarly, many go abroad stealing other identities. In 2009-10,many former agency people in Bangladesh went to Britain using this mean. British home ministry unearthed the incident and it became a news item.

TIN certificate and return submission verification could easily stop these fraudulent activities. Immigration could easily detect such fake persons with such verification system. Similarly, flow of illicit capital could also be checked. The more easy and user friendly our tax return system becomes, the more benefit the govt will reap from it.