Half of the country's non-government organisations (NGOs) are still remained out of the tax net, causing significant losses of direct tax.
Of the total 961 NGOs registered with the NGO Affairs Bureau, 488 or 50.78 per cent have TINs and were submitting income tax returns.
As per Income Tax Ordinance-1984, all NGOs registered with the bureau, must have Taxpayers Identification Number (TIN) and submit tax returns annually.
A recently compiled data of tax zone-5 found the poor scenario of tax compliance by the NGOs in Dhaka. However, the taxmen found majority of the NGOs have central office in the capital.
The tax zone is authorised to supervise and monitor the tax compliance by the NGOs.
However, the NGOs' income from only microcredit programme is exempted from tax.
The NGOs are required to pay tax on their commercial activities, bank interest and rent of conference hall etc.
The taxmen found huge untapped potential in this sector as they suspect many of the NGOs do not have even TINs.
Officials said tax collection from the NGOs was also poor compared to their increased commercial activities.
In fiscal year (FY) 2016-17, the NBR received Tk 2.84 billion in income tax from NGOs, up from Tk 1.32 billion in 2015-16.
Until November of the current FY, the NGOs paid Tk 344 million in income tax.
The taxmen found poor trend of tax payment from NGOs this year compared to that of the last FY.
"We have prepared the database and intensified efforts to make the NGOs tax complaint," said commissioner of tax zone-5 Shahin Akhter.
The concerned tax circle has started sending letters to all the NGO Bureau-listed NGOs to obtain TINs and pay tax, she said.
There is a huge scope to work in this sector as many of the NGOs are yet to aware about their tax-related responsibilities, according to the commissioner.
"We will try to motivate them through discussions and make them aware about the existing obligation under the income tax law for filing tax returns," she said.
Some of the NGOs might have tax registration as individual taxpayers, but were not reflected in the compiled data, she added.
Under an order of the National Board of Revenue (NBR) issued in August 2017, the NGOs have to pay tax at source to the tax zone-5 instead of their scattered jurisdiction for withholding taxes.
Earlier, the NGOs were paying source tax under different heads in different tax zones and submitting the returns to the zone-5.
Due to this scattered jurisdiction, tax officials found it difficult to monitor and verify their proper payment of withholding tax.
Ms Akhter said they would request all the NGOs to pay tax under the dedicated tax zone by sending letters.
The taxmen said there was a tax-related legal dispute with Brac, the country's largest NGO. The issue was resolved after the Supreme Court (SC) in August, 2016 asked it to pay Tk 4.04 billion in income tax for a period of 11 years between 1993 and 2012.
Dr Mirza Azizul Islam, former finance adviser and visiting professor of Brac University Business School, stressed the need for proper campaign to make NGOs aware about the payable tax on their income.
"There might be confusion among the NGOs on what portion of income they should pay tax, but they must submit tax returns obeying the law," he added.
About the tax potential, he said it is a matter of uniform tax treatment, not the amount of tax collection. "NGOs are working for the betterment of people, but the tax should be paid on their profit making activities," he added.
