The government should curb its increasing dependence on the value-added tax as it negatively affects the poor, said Sushasoner Jonny Procharavizan (Supro), a network of grassroots level non-government organisations, yesterday.
Rich and poor buy products at the same price, furnishing the same amount of VAT, said KGM Faruque, national council member of Supro, while presenting a paper at a discussion on the reform of progressive tax system.
Supro, which is also known as the Campaign for Good Governance, organised the event at the National Press Club.
“Everyone has to pay VAT. A beggar has to pay VAT if he/she buys anything. This is a sheer injustice originating from the tax policy,” he said.
The poor have to spend a majority of their income on essential commodities and the government's high dependence on indirect tax negatively affects them.
Supro held meetings with people in 24 districts of 8 divisions between September and November 2017.
The participants at the meetings called for widening of the tax net, curbing tax evasion and illegal fund transfer out of the country.
They also suggested reducing dependence on VAT, which is the biggest source of revenue for the government. VAT accounted for 36 percent of the total tax of Tk 185,003 crore collected in fiscal 2016-17.
Only one percent of the population pays income tax, and one crore could be brought under the tax net.
“Instead of taking steps to increase direct tax collection, the government is increasing the purview of the indirect tax VAT.”
The income tax receipts could be increased by checking corruption in the collection process.
More shopowners should be brought under the tax net as some 60 lakh of the 80 lakh present in the country have the capacity to pay it, Faruque added.
The progressive tax system that focuses more on direct tax aims to reduce disparities, said Muhammad Abdul Mazid, former chairman of the National Board of Revenue.
About 92 percent of the taxpayers are from the middle-class demographic and the rest are rich.
“Reform in tax system in necessary,” he said, adding that implementation of the VAT law has been deferred to 2019 because of resistance by businesses.
Once framed, the law should be implemented, Mazid said, while suggesting awareness raising and social movement to encourage all to pay tax properly.
Matiur Rahman, commissioner of the NBR's Large Taxpayers' Unit, said his unit collects 56 percent of the total VAT collected in a year.
Some 90 percent of the VAT collected come from 250-300 firms and these companies could be brought under the purview of the new VAT law initially.
Tax dodging takes place owing to loopholes in tax system, he added.
“When any official wants to do something good, the person faces opposition. Letters are sent by unnamed persons and lobbyists are appointed against them,” he said, while calling for protection for courageous and creative officers.
State Minister for Finance MA Mannan emphasised on preventing wastage of money.