Taxation is considered the principal source of government earnings. What the government earns through taxes is spent on multidimensional services like security, social safety, health care, roads and bridges, transport, education and other services. Therefore, governments usually emphasise on enlarging the tax coverage and tax providers net. Acts were enacted to provide adequate legal power to the tax collectors so that they can meet the targeted revenue collection. This ability sometimes drives tax collectors into illegal exercise of power.
In modern system of governance, tax system is important because it provides governments with reliable and sustainable means of revenue collection, reduces dependency on foreign aid by increasing financial autonomy, enables government to provide various cash support to deserving citizens, encourages good governance, accountability and transparency, helps formalise the economy and promote economic growth etc. It is the government's right to collect taxes, but at the same time government must remember that it is the taxpayer's right to know how efficiently the government is spending their money for the welfare of the entire nation. It is also a taxpayer's right to pay tax without hassle or any sort of anxiety.
In Bangladesh, the government is targeting increased amount of revenues every year. But the number of taxpayers is not increasing at the same pace. Therefore, existing taxpayers, mainly the institutional/corporate taxpayers, are being pressed by the collectors so that the target can be reached at any cost. Many businesses have recently complained that the customs authority is evaluating their imported raw materials at unknown rates. In this age of digitisation, the duty on imported products should be crystal clear for the importer. Excessive power has made the tax collecting authorities seemingly unquestionable. Without giving in to these collectors, it would be difficult for anyone to do business in this country. Ambiguous evaluation method or evaluation rate creates panic or fear among the businesses and creates an environment where bribe is offered to the concerned officials in order to get rid of the hassles.
On the other hand, officials complain that, businesses always try to get customs waivers. Cash incentives were abused in mass scale by the private sector. But any form of abuse is impossible without cooperation from the collectors. So, it would not be right to blame the two sides.
There is a debate that increased amount of taxes will facilitate developed services from the government, transparency of public expenditure and good governance. Regardless of the strength in argument for and against this motion, it needs to be stressed that the collection of taxes should be transparent and mutually satisfactory. It should be within the boundaries of legal framework to satisfy needs of the nation, and not just for the illegal benefits of collectors and taxpayers only.
Most citizens of Bangladesh have a fear about tax calculation, fixation, collection and the tax collectors. This is because evasion of taxes is one of the easiest charges that can be used to send someone to prison. Therefore, it is the government and the taxation authority's responsibility to simplify the processes and remove this fear so as to increase the tax net and tax collection from the taxpayers.
The tax regime can be observed from a different angle. Duty free and quota free market access to the developed markets was Bangladesh's demand in the WTO and all other regional trade agreement negotiation platforms. But what will be the country's position after the year 2024 when Bangladesh is expected to graduate from the list of Least Developed Countries (LDCs). Other LDC countries can then ask Bangladesh to provide duty free access to their products into Bangladesh. Bangladesh would have to sign a significant number of Free Trade Agreements (FTA) with its major trade partners to sustain exports to those markets. Then Bangladesh would need to offer some tax benefits to these products coming into Bangladesh.
This is why, most business sectors in the country want tax benefits like tax exemption, tax waivers and tax holidays. Such benefits will act as protection against foreign products or make them competitive in local or export market.
Tax collectors think that tax waiver is reducing their scope and making their target unreachable. But the spill-over effects need to be analysed. These can include situations where expansion of factories will increase chances to collect increased amount of VAT; a sector with tax waivers can boost employment and increase number of taxpayers in the form of income tax.
Similarly, tax collectors have a tendency to oppose proposals for reduction of corporate tax rate or income tax rate. But they do not realise that the fund created through tax waived will not be used in consumption. Rather it will be reinvested in the economy and will increase employment opportunities, export earnings or import substitution and lead to gross domestic product (GDP) growth. Thus it will increase chances of getting revenue in other forms like income tax, VAT.
At the same time, reduced corporate tax rate or income tax rate could bring more taxpayers into the tax net. Therefore, academic research is needed to assess the impact of corporate tax rate reduction on Bangladesh economy. Corporate tax rate reduction could be a favourable initiative for the economic development of Bangladesh.
Finally it can be stated that, a fearless, transparent, reasonable and justified tax regime can have a positive impact on the economic development of Bangladesh. Tax collectors need to remember that they and the tax payers are two sides of the same coin, contributing to legal wellbeing of each other.
Md Joynal Abdin is Executive Director, DCCI Business Institute (DBI). Views expressed here is not from the organisation that the author represents. firstname.lastname@example.org
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