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Well spelt,easy eReturn system
Could resolve govt's revenue problem. |
NBR in the first six months of current fiscal year fails to attain its target. There is a revenue shortfall of Taka 232.27 billion. Income tax sector accounts for Taka 85.63 billion shortfall, the largest among other sectors. This year NBR's revenue target is Taka 4.3 trillion. But Taka 1.65 trillion have been collected so far(source: “Chhoy Mashey Rajoshho Ghatti Taka 232.27 billion”,P-12,January 26,2024,Daily Prothom Alo).
High inflation, limited work opportunities limit the ways to increase income tax revenue from domestic sources. Bangladeshis working abroad can pay taxes through Bangladeshi embassies in respective countries. If NBR can recruit third party or exchange houses then more Bangladeshis working abroad can feel encouraged to pay taxes. Spending on Probashi bond ,pension scheme and incentives on remittances could at least be covered by increased revenue collection.
Another thing I noticed is that uniform 10% source tax on bank deposits. Imagine a widow /mother whose relatives work abroad and send money to this lady’s account to run the family expenditure at home. If the amount of the sent money does not cross a threshold limit, then source tax on bank deposits should be lower than 10% or zero. Similarly, a person who opened a bank account when he was employed but now becomes unemployed should not pay 10% source tax on bank deposits. Because money he has on the balance is to cover his future expenses. If the balance does not cross a certain limit he should not pay taxes. Balance during the period of unemployment (before he/she lands into other income earning opportunity ,which will be reflected in the KYC form) should not be considered as taxable income.Our government does not provide any unemployment incentives. This 10% waiver on bank deposits of the unemployed should be considered as incentives.
I also find it objectionable to consider compensation receipt instead of wages/salary as taxable income under the section salary income . Imagine an individual who received a lump sum amount after completing a contract but does not land into another income earning opportunity. Till this money is not invested into new business or share market,it should not be considered as taxable income.
There should be clear distinction between cooperatives from the town and cooperatives from rural area. Why? Cooperative earning from agri business is not taxable. In the towns, the cooperatives we see are operated by vested quarters. In the municipality areas, petty businesses regularly pay ‘unofficial taxes' to vested quarters. And often ‘territorial army' takes control of the area the business activities take place. Often these small and micro businesses rely on these unsafe cooperatives. Many fraudulent cooperatives swindled money from people and ran away. So earnings of cooperatives from the municipalities and city corporation should be taxed.
Deductions in business income include spending on research and development and marketing and promotional activities. Many business houses have their own marketing and research department. Many houses also operate banks and other ventures with whom PR firms do business. So at the end of the day, spending on these sectors are not true spending as the business houses retain part of the spending through other ventures. Spending on promotion of new product should not be taxed but spending on promotion of existing product that secures a market share should be taxed.
NBR's income tax guide 2023 is very handy in preparing returns. By adding more examples and illustrations, it can be made a complete guide to understanding tax returns. NBR's database and tax offices are its true sources of data. Incomplete and flawed returns can be picked up and used as template on its websites to educate the taxpayers. An informative website and well illustrated income tax guide could make the task easy for the taxpayers.
Back in October last year,I penned this piece titled “New Tax Act And eReturn System” where I discussed some features and shared my experiences with the eReturn system. Sharing it again:
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 benefits the govt will reap from it.
