Published in Dhaka Tribune on Wednesday, 17 September 2014.
Study: Less than 1% of the population pays taxes
Tribune Report
The governments in the developing countries like Bangladesh have exempted people with low incomes
Despite recent improvements, the number of taxpayers continue to be a major concern for the government, with less than 1% of the population properly paying tax in Bangladesh.
It should not be any consolation for Bangladesh that 3% of Indians, less than 1% in Pakistan and only 0.3% people in Vietnam pay income tax, comprising the list of some of the lowest performing countries in the Asia-Pacific region.
According to the Economic and Social Survey of Asia and the Pacific 2014, prepared by the Economic and Social Commission for Asia and Pacific (Escap) of the United Nations, there are several reasons for this.
The governments in the developing countries like Bangladesh have exempted people with low incomes. Moreover, a large number of people work informally or in agriculture, making it hard for the authority to collect taxes.
However, the alarming reason is that wealthier individuals have continued to avoid paying tax because of non-compliance and poor implementation of laws.
According to the National Board of Revenue (NBR), the tax authority in Bangladesh, at least seven million people earn enough to pay taxes. Only 1.7 million of them has tax identification numbers (TINs).
Last year, only 1.1 million out of the TIN-holders submitted their income tax returns which is roughly 0.73% of the 150 million population in Bangladesh.
Last year, the amount of tax collected was 10.5% of the total Gross Domestic Product (GDP). The Escap survey suggests that Bangladesh has the potential to collect up to 18% of the GDP as tax.
China collecting 19.4% of GDP as taxes in 2012, Thailand 18.8% in 2011 and Japan 17% in 2012 are some of the best performers in this grid from this region.
On different occasions, taxpayers have said the unfriendliness of the revenue officers and the complexities in the payment process discourage them. Reports of taxpayers getting harassed by revenue officials have been very common in this part of the world.
According to a survey conducted by non-government organisation Sushashoner Jonno Procharabhijan (meaning publicity campaign for good governance), 78% people thinks that the existing system in Bangladesh is not taxpayer-friendly and 63% said they felt discouraged because of the complexities in the system.
The Escap reports says, for paying income tax once, people in Georgia have to meet tax officials 0.6 times on an average, Indonesia 0.2, and Vietnam 0.9 times. Bangladeshis, however, have to meet tax officials 1.3 times on an average, which means that the payment cannot be completed in one meeting, indicating that the tax administration system is not smooth and prone to corruption.
Although the government has always said it was keen to encourage people and make them aware of paying proper taxes, over the last two years, the number of taxpayers has increased by only about 50,000.
No matter what the authorities said, publicity measures were generally focused on special annual days such as the National Income Tax Day, the Income Tax Fair, the Value Added Tax Day, Customs Day, and so on.
Former NBR chief Mohammad Abdul Majid told the Dhaka Tribune: “The board [NBR] should expand its activities on a rural level to raise awareness and encourage people to pay income tax. Many even do not know if their incomes are taxable or not. So, a massive publicity campaign can help improve the scenario.”
Prof Mustafizur Rahman, executive director of civil society think tank Centre for Policy Dialogue (CPD), told the Dhaka Tribune: “Many countries are now resorting to information and communication technologies for forensic auditing. Bangladesh have been trying to promote ICT in tax administration, but the implementation is still very insignificant and weak.”
He also said the large number of pending cases at the tax tribunals was another indicator of the complexities in the existing administration.
The country’s apex trade body FBCCI President Kazi Akram Uddin said out of the 35 million businessmen in the country, only 1.34 million have electronic TINs.
He suggested that the authorities would have to ensure service-oriented attitude among the officials.
“You [tax officials] have to bring changes in your behaviour. Moreover, there should be accountability and transparency in the tax collection system, otherwise it will not work,” he said.