No alternative to raising Tax-GDP ratio

The additional efforts that the National Board of Revenue (NBR) has been putting in to raise income tax revenues in recent years have started paying dividend albeit to a nominal extent. According to a report published in this newspaper, in the last fiscal year, such annual submission "of income-tax by individual taxpayers increased 17 per cent to 3.5 million till an extended timeline. Official statistics show the government's tax collection from individuals and their return submissions yet account for only one-third of the total registered taxpayers." It had become a culture for citizens to obtain tax identification numbers (TIN) to avail the many essential services (as mandated by authorities) but not file returns. From this year, NBR got tough with its regulations and a 10 per cent penalty clause had been added to non-compliance on return filing. That appears to have had some effect, and NBR has witnessed a slight rise.

Any change in Bangladesh comes excruciatingly slowly and when people are asked to comply with laws that have been in existence for many years (but never properly enforced), they are doubly inclined not to comply. However, when it comes to government revenue, there can be no compromise on individual taxable income. This is a universal truth for all governments, in practically every country of the world. For instance, in Canada, individuals are charged anywhere between 30 per cent to nearly half their income. Of course, this sacrifice by citizens is matched by a wealth of services that government provides including free healthcare and a high quality of life.

Bangladeshis are constantly complaining as to why they should pay taxes because governments provide nothing in return. This is simply not true. Quality of services leave much to be desired, yes. But to say that the State provides nothing is a gross understatement. Free education to girls and subsidised education to all - right up to university in public educational institutions. Subsidised healthcare in public hospitals is also one such facility. People tend to forget these things, or cherry pick whatever suits their needs - all in an effort to evade taxes. How convenient! There are millions of people of Bangladeshis living abroad where they work and pay taxes because the law stipulates it thus and the law is enforced, pure and simple.

There are an estimated 9.80 million TIN holders and estimated 3.5 million returns have been filed (one-third approximately). The challenge for the authorities from this point on will be to steadily increase the number of people filing returns and raising the tax-GDP ratio. In no country is it perfect, but the ratio in this country is hilariously low. For decades, the revenue authorities had ignored the issue and there were reasons. The advent and implementation of technology in NBR monitoring activities has been bearing some benefits. Again, for more than a decade, certain quarters in the revenue authority resisted implementation of reforms and induction of technology from the fear that their roles and responsibilities would increase and authority undermined. Things are slowly beginning to change there too.

The data speaks for itself. At the expiry date for return-submission on January 31, 2024, NBR had collected taxes worth Tk 57.99 billion from 3.5 million filings - an increase of 18.39 per cent in revenue; and an increase of 15.56 per cent active TIN holders filing returns. This is tangible progress - a trend that must continue for the foreseeable future to reach a target that corresponds to a nation that is heading towards middle-income country status in less than a decade. Economic development cannot flourish based on foreign credit, internal revenue generation must increase or such development will be unsustainable.