Economy
6 months ago

NBR still relies high on indirect tax receipts

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The revenue board continues to exhibit its heavy reliance on indirect tax collection, with a lack of significant reductions in the last decade until fiscal year (FY) 2022-23.

In FY23, data available with the National Board of Revenue (NBR) shows, indirect tax collection accounted for 66 per cent of the total tax revenue.

There was a modest 5.91-per cent decline in this tax category, reducing from 71.91 per cent in FY10 to 66 per cent in FY23 over the past decade.

By contrast, the NBR data reveals a more substantial decline of 10.73 per cent in one decade from FY 2000-01 to FY 2009-10.

Indirect taxes include value-added tax (VAT), goods and services tax (GST) and sales tax. Other examples include excise duty, customs duty and import duty.

According to a recent study, VAT is an injustice for the poor in Bangladesh as they have to shoulder a 12.1-per cent regressive tax burden on their income.

According to the survey jointly conducted by SUPRO and Oxfam Bangladesh, the burden of VAT is only 5.9 per cent for the rich.

The poor have yet to learn that they are paying tax daily as there is VAT on mobile phone bills, medicine, gas, electricity and other essential services, it said.

Dr AB Mirza Azizul Islam, an economist and former adviser to a caretaker government, said, "Higher dependence on indirect tax is contributing to rising inequality in society."

Indirect taxes imposed on goods and services, which consumers pay at fixed rates, are effectively diminishing the actual income of individuals with lower earnings, he told the FE.

The country should boost the role of direct tax to this end, Dr Islam suggested, saying that import duty could be reduced.

Dr Muhammad Abdul Mazid, former chairman of the NBR, said indirect tax collection should be reduced more than the existing ratio.

The current such tax collection ratio is much higher than the direct tax, according to him.

The former secretary noted the challenge in accurately verifying whether source taxes deducted from individuals are deposited into the state exchequer.

There should be two types of tax administrators in Bangladesh like India to boost the overall tax collection, Dr Mazid told the FE.

Two distinct tax administrations exist in India: the Central Board of Direct Taxes (CBDT) overseeing direct taxes, and the Central Board of Indirect Taxes and Customs (CBIC) managing indirect taxes.

According to a top NBR official, the Income Tax Act 2023 aims to streamline and strengthen the direct tax collection process, fostering a more efficient and equitable revenue system.

By placing a greater emphasis on direct taxation, the government has anticipated a reduction in reliance on indirect taxes, ultimately promoting a fairer distribution of the tax burden, he cited.

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