How to get higher revenue earnings
FM sees tax-net expansion as magic formula
Finance minister AHM Mustafa Kamal has said "expansion of tax net" and "easy and simple tax-filing system" would be the two main tools to boost tax revenue earnings in the next fiscal.
"Earlier, there was a concept that the taxpayers who had been paying tax over the years will only be paying in future too," he added.
"Now, we've retreated from that philosophy. The tax net will now be expanded," Mr Kamal told a post-budget virtual press briefing in Dhaka on Friday.
National Board of Revenue (NBR) chairman Abu Hena Md Rahmatul Muneem, who attended the event, echoed the minister's view on the matter.
He said the board's earlier stance was to boost taxes from existing tax payers imposing more taxes rather than enlarging tax network.
About setting an ambitious target, he said the revenue target is achievable if COVID-19's impact ends soon. "But it'd be difficult if the effect persists."
Mr Kamal has set a target to earn a staggering Tk 3.78 trillion from revenue income in fiscal year (FY) 2020-21 to bankroll the Tk 5.68-trillion budget outlay.
Out of the fund, Tk 3.30 trillion is expected to be earned through the NBR channel.
Local economists and financial analysts are critical of the target, terming it ambitious and unachievable because of pandemic and lack of capacity of the NBR.
However, both Mr Kamal and Mr Muneem expressed their optimism about the achievement of revenue earnings through expanding the tax net in the upcoming year.
The minister said the revenue-GDP ratio is only about 10 per cent now. "If we can enhance it to 15-16 per cent, we'll have surplus money for public investment."
"For this, we emphasise automation. Coronavirus has affected our automation activities like procurement of EFD (electronic fiscal device) machines."
"But the procurement work is now under process. We're hopeful of introducing the automated tax collection system shortly. It will help us improve revenue earnings," Mr Kamal stated.
EFD is designed for use in business for efficient management controls in areas of sales analysis and stock control system.
The device conforms to the requirements specified by law. It is used by retail businesses that issue receipts manually.
Mr Muneem said, "In the past, we enhanced taxes to boost the tax-GDP ratio which was a wrong concept. We've changed our stance and are emphasising expansion of tax net."
"As we tried to increase taxes in the past, but incidence of tax evasion also swelled. It was a wrong concept. In the new concept, when we will boost tax net, more people will pay taxes.
"We need not increase tax rates," the NBR boss argued.
"Besides, we will go for massive automation. In that case, attempts of tax evasion will be curbed. Tax rate will also be gradually decreasing," he said.
People will find a friendly tax payment system. The country's tax-GDP ratio will automatically improve, Mr Muneem mentioned.
Finally, Mr Kamal directed the NBR to make a simplified tax payment system to improve the country's tax base.