One of the much talked about mechanisms for raising NBR revenue as well as bringing a sense of appropriateness in the country's Tax-GDP ratio is the expansion of tax net. No doubt, the low Tax-GDP ratio is an indication of the narrow tax net that despite promises for expansion every year in the budget announcement has remained unchanged, for the most part. This time, too, the finance minister's budget speech is no exception. Reiterating the vow to expand the tax net, he 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.
For long, it has been the practice to depend more on the tax payers who are already paying taxes, especially those having big turnovers or running corporate businesses. The introduction of Tax Identification Number (TIN) and its requirement to open a bank account and a host of other activities including automobile fitness test, buying and selling of property etc., did not actually need the evidence whether the incumbent submits his tax return or is eligible to pay taxes. TIN, thus, was no more than a proof of registration with the tax authorities. No doubt, making it mandatory was a big job done, but what was needed in course of time, over the past decade or so, was to see that taxes, however small, are not missed out, or in other words evaded by the TIN holders. There are innumerable TIN holders running small businesses or earning from various sources who are outside the tax net. The finance minister himself has been quoted as saying weeks back that there are as many as 40 million middle income people in the country who do not pay taxes.
The proposed budget for 2020-21 fiscal year sets a target of Tk 3.78 trillion from revenue income 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 the Covid-19 pandemic and lack of capacity of the National Board of Revenue (NBR). The finance minster, however, is optimistic to make it achievable with substantial expansion of the tax net. The present Tax-GDP ratio hovering around 10 per cent is viewed by economists as grossly incongruous to economic upliftment and has been pressing for long to raise it to 15-16 per cent to be able to have surplus money for public investment.
While bringing wealthy evaders to book is the prime responsibility of the tax authorities, such drive do not usually have any major impact on revenue collection. So, essentially, it is a combination of regular activities and bringing new taxpayers that can pay in tax mobilisation to the desired level. Reforms to broaden the tax net should be comprehensive and innovative that can generate revenue for the state not only in short but also in the long run.
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