Simplifying NBR service delivery

The provision of submitting Proof of Submission of (Tax) Return (PSR) as a prerequisite for accessing various services from the government departments and financial institutions incorporated by the National Board of Revenue (NBR) during the pre-interim government period still remains intact. Evidently, the idea behind this arrangement was to broaden tax coverage and ensure compliance from eligible taxpayers. In November last, the NBR made submission of PSR mandatory for accessing 43 services so that, as the head of the tax authority then told reporters at a briefing, the move would help increase the number of Taxpayer Identification Number (TIN) holders as well as income tax return submissions. So far 45 services have been brought under the mandatory PSR rule.

However, in the proposed budget for the next fiscal year (FY 2025-26), the government has made some relaxations.  At least 12 services would hence be exempted from the mandatory PSR-related formalities. Accordingly, submission of TIN certificate, not the entire tax return documentation, will be enough for anyone to avail of 12 services. The reason given for this change in the existing requirements for the said services is that the provision of submitting PSR proved to be unnecessary hurdles to delivering certain services. So, the 'illogical' requirements have been removed from delivery of those services. Notably, the services under consideration include, among others, renewal or issuance of a credit card, obtaining a trade licence under the city corporations and municipalities, getting an e-commerce business licence, gaining membership of various professional bodies, opening a post office savings account exceeding Tk500,000 and so on.

Clearly, the specific services exempted from mandatory PSR submission points to the fact that the argument of PSR-compliance to widen tax net and hence revenue collection was not essentially factual. In fact, compulsion in an overwhelming number of cases has proved ineffective simply because the NBR machinery is not up to the task. Evasion of tax by wealthy taxpayers is mostly facilitated by corrupt elements in the tax administration. Also, tougher rules and the attendant hassles and harassments have discouraged many potential taxpayers to obtain a TIN certificate in the first place. Unsurprisingly, Bangladesh's current tax-to-GDP ratio is 7.4 per cent---the lowest in South Asia with 12.5 per cent in India, 17.5 per cent in Nepal and 12.3 per cent in Bhutan.

However, a 9.0 per cent (total projected revenue collection at Tk 4.99 trillion) rise in  revenue collection has been projected in the FY26 budget, marking a 7.6 per cent increase over the revised target of the current fiscal year. Arguably, the NBR's departure from the PSR requirement for listed services implies that the philosophy of compliance to ensure better tax collection has undergone a qualitative shift. This is undoubtedly a move in the right direction. More than relieving the burden of supplying a pile of documents for securing a government service, the easing of PSR-related preconditions would go a long way in simplifying the revenue collection procedure. In that case, such streamlining of service delivery will not only be of help to recipients of services, but will also make the tax collection procedure more efficient and taxpayer-friendly. Hopefully, the government or for that matter the tax authority would rethink the entire strategy of service delivery in favour of a simpler and hassle-free procedure in the interest of taxpayers.