The National Board of Revenue (NBR), the tax authority, started honouring taxpayers in different categories since the last fiscal year. Title like 'Kar Bahadur' was bestowed on them this year. This is a good move in the right direction. Those who are paying taxes honestly and fully should be recognised by the state. This type of honour for the honest taxpayers will encourage others in peer groups to come forward to pay taxes.
Many people in society have taxable incomes, but a fear factor works in them lest they are caught or pursued for paying more taxes. Also, they fear that taxmen will raise a hundred and one questions about the sources of their incomes once they file tax returns. The fear factor has so long kept many wealthy persons from filing tax returns with the tax authority. In fact, the queer questioning and suspicion by the taxmen were practices of the past. Then, maybe a decade earlier or so, very few people volunteered to pay individual income tax. The tax deduction at source from a person's monthly or yearly income payment was also minimal. The revenue authority received a very small amount of income from income tax source. It depended heavily on two other sources of taxes like value added tax (VAT) and import duty to fill up the gaps in tax revenue.
The government's budgetary allocation, both revenue and development, was also low compared to that of what is of today. In the last few years, expenditure, both in revenue and development sectors, went up phenomenally with increased revenue from tax and other non-tax sources. Now the size of the economy stands at US$ 250 billion yearly. The rate of tax collection went up with the increase in size of the economy. The revenue collection went up more in absolute terms, but not proportionately. Still the tax-GDP ratio in the economy stands at or around 12 per cent which is considered to be too low when compared with that of the same in the parallel economies of the world.
However, Bangladesh is on the right tract as far as the strategy of revenue collection is concerned. Those days are gone when people could bypass the issue of tax payment. Now as the month of November - the tax month--nears, the wealthy people run here and there to collect tax-related or tax-supporting papers. Organising tax fairs was another innovation by the tax authority to attract more people to pay taxes. This year hundreds and thousands of people thronged the tax fair to pay taxes. The National Board of Revenue had to keep the tax fair open for an extended period.
The taxpayers did not find any hassle-free way of paying tax in the past. Time has changed for the better. The big rush of taxpayers to the tax fair this year showed people's readiness to pay taxes. This year's added attraction was the introduction of tax cards for all taxpaying people. The tax card worked as an important instrument in attracting potential taxpayers to the fair to pay taxes. The tax card is nothing but recognition of the taxpaying people which is very important to them. They can show proudly to the peer groups that they paid tax. That will work as magic to bring other people having taxable incomes to pay tax. Small tax, but paid by millions, will fill up the coffers of the revenue authority fully.
The universal self-assessment method has revolutionised income tax payment. After the introduction of that method in late nineties of the last century many people volunteered to pay taxes. Tax payment by many people in a visible way has demonstrative effect on potential taxpayers. When people see that others with the same incomes and status are paying taxes, the non-paying people with taxable incomes will also ask where and how to pay tax. For them, tax fairs are a unique opportunity.
The tax authority took tax fairs this year to districts where many wealthy people live. But some of them suffer from a wrong notion that, if they pay taxes, their holding of assets will become known to taxmen which, they think, will bring more problems for them. This fear should be removed.
Tax rules and tax returns should be made easy to understand by the taxpaying people. Also, no question should be raised by the tax people if taxpayers' net worth does not exceed a certain amount of money or in value. This writer knows some small taxpayers living in apprehension lest taxmen come and ask them many questions. These people do not own cars or homes; they live in rented houses, but as the income level per annum exceed Tk 3,00,000, they pay taxes. This writer told them, no one from the NBR will ask them any question in this regard: you just go and pay the taxes. These people are honest in their admission, but the fears never go away from them as they think taxmen can raise many un-related questions even. This writer assured them, if that happens, he will go with them to the taxmen and will explain their positions.
The writer is Professor of Economics at the University of Dhaka.
abuahmedecon@yahoo.com