Revenue department - how well is it governed?

Is top priority being given to the practice of best governance in the government's revenue department (i.e.NBR)? The matter of priority, of course, depends on how the government treats and ranks the revenue branch. The equity-based financing has been on the gradual decline although revenue collection is growing. The government is implementing several types of reforms in tax and tax administration according to proposals made in the Eighth 5-Year Plan and those of the Perspective Plan 2021-41. The revenue growth is yet to reach a desirable level. An attempt has been made here to explore symptomatically how well the Revenue Department is being governed.

One of the major objectives of management or governance is to enact new laws, introducing rules, regulations, policies, methods, procedures to simplify service providing, strengthen work performance, and to achieve targets /goals effectively and efficiently. How much good governance is applied to this objective is evaluated by the extent of satisfying the stakeholders' (i.e. taxpayers, the government, tax personnel) interest and expectations.

A great deal of reforms in tax and tax administration are being implemented in revenue department of the government as per Eighth 5-Year plan. Broadly , they are concerned with enacting /revising/ amending/ simplifying laws, acts, rules, regulations; infrastructure and capacity strengthening; introduction of modern management system; automation and improving taxpayers service delivery. The most influential output of the reform process is Income Tax Act, 2023 repealing the Income-tax Ordinance, 1984. The new Act seems to have been enacted without comprehensive review at the concerned key stakeholders' (including practitioners) level.

Reforms are basically of two types-- Type-1:  reforms in carrying out basic organisational functions or activities (Relating to Tax, VAT, Customs, etc), and Type-2: reforms in management or governance process itself. Most of the NBR's reforms (report on the overall status not available, partially some can be perceived practically) are related to Type 1. Type 2 reforms   mainly exist in declaration only, awaiting implementation. Here some significant reforms (mentioned in Eighth 5-Year Plan), here categorised as Type 1, are: Integrated Revenue Management Programme, and those under Type 2 are: Starting FY2024, selection of NBR Chair and the new Chair of the Tax Policy Unit should be done on  a professional basis with a 5-year fixed term appointment. This also includes providing adequate resources and autonomy to NBR Chair and the Chair of Tax Policy Unit to modernise the respective offices with modern technology, professional staffing and policy and research capabilities. 

So far as our knowledge is concerned, integrated software for revenue management inclusive of Income Tax, VAT, and Customs streams to identify the common source or base of financial information and transactions of the same taxpayer is yet to be installed and implemented. Thus, it is obvious that major inadequacies and inconsistencies exist in planning and implementing reforms of both types. For an example, we can cite here The Income Tax Act, 2023 in which almost all business entities have been included in the definition of a company. There is a separate Company Act that clearly defines a company. How far is it legal to redefine a company without a corresponding amendment to the Company Act? Was there no other alternative to expanding the tax base? Can we overlook social justice and equity to address the mounting economic inequality? The new Income Tax Act provides no specific operating guidelines for dealing with, and disposing of old cases relating to tax, etc. Consequently, the dealing officials, taxpayers, and the government are destined to suffer in a number of forms and ways.

The NBR is the apex authority for tax administration, established under President's Order No. 76 of 1972. Administratively, it is under the Internal Resources Division (IRD) of the Ministry of Finance (MOF). NBR is the largest revenue collecting body of the government. It is ill-nurtured in view of its role and significance. Besides this, administrative generalists steer it without specialised skill, knowledge, and experience. In order to allow opportunity to general administrators, the President's Order has been amended to select a secretary to the government as chairman to NBR. The original order succinctly stated in Clause 3(3): The government shall appoint one of the members of the Board to be its Chairman. To facilitate appointment of IRD secretary, the amendment order was issued in 2009, but put into retrospective effect from 21-04-1979 on which day IRD was born as a separate division of Ministry of Finance. This step was quite contrary to the principle of good governance, and to the principle of division of labour, and seriously de-motivating.

The very crucial task is to have the goals or targets or both accomplished properly but there is lack of stable and effective motivating environment. Linking performance targets with adequate reward system are not observed most probably due to negatively preconceived notions about the revenue personnel's work behaviour. IRD report reveals that NBR is understaffed to the extent of about 36 per cent while it is a mass-service organisation dealing with the number of files beyond optimum supervisory span. In spite of automation, human touch is unavoidably needed to dispose of the files and cases on schedule.

Whatever plans and policies we adopt, the key challenge is to implement them successfully. From the perspective of organisational behaviour, coherent, cooperative and well-synchronised group efforts as well as team-spirit are a necessary precondition for successful implementation. In revenue collection drive, there are three major streams of work groups belonging to income tax, VAT and customs. Inter-stream and intra-stream relationships are a pivotal factor for proper functioning of the revenue department. Any sort of interest-conflict originating from the weakness of organisational structure paralyses the governance process. Delay in developing, digitalising, and implementing integrated revenue management is symptomatic of leniency in governance.   

The perspective plan (2021-41) contains proposed strategies for institutional development but no specific mention is made of revenue department. Emphasis was given upon strengthening core governance in many other institutions while NBR ought to be regarded as the most important of all as we are all breast-fed by this organisation. For reasons unknown, we prefer powder-milk to get nutrition.

It is worth mentioning that the skills of administration ( traditionally  technical, conceptual and interpersonal) are evolving over time as the modern age is characterised by increasing level of specialisation where even top managers without technical expertise and knowledge can neither  decide  effectively nor evaluate  any decision  of an organisation whose functions  are no more  general in nature. This is true in many organisations. General administrators are required only to perform those activities which are not included in the portfolio of functional administrators. The technical skill develops as a result of long experiences in the same organisation or in similar type of organisation. If backed by professional education, one's dexterity is intensified by working experience in the job matching with education.

Performance improvement is largely a product of good governance. Philosophy, values and principles shape up the quality of good governance. Bangladesh has long been on the road to growth and development. To make our development equitable, balanced, and above all, more egalitarian, we must bolster our equity-base adequately to lessen our dependence upon gradually increasing debt-fund. It is paradoxical to have a rising per capita income with debt escalating at a higher speed. Rejuvenating our revenue department requires a reshuffling of governance system with high priority. 

Haradhan Sarker, PhD, ex-Financial Analyst, Sonali Bank, & Professor of Management (Rtd).
sarkerh1958@gmail.com