The curious case of NBR's online tax return filing project

Everything was going well for the online tax return filing project until the end of 2019.

The first online tax return filing scheme -- Bangladesh Integrated Tax Administration System (BITAX) -- completed on June 2018 and the National Board of Revenue's agreement with the vendor expired on 29 November 2019.

Just a month later, the first blow came from the then NBR Chairman Md Mosharraf Hossain Bhuiyan.

The former bureaucrat, who had been at the helm of the revenue administration for two years since January 2018, wrote to the Asian Development Bank (ADB), the major financier of the project, calling the BITAX project a failure.

He raised some allegations against the vendor, FPT Information System Corporation of Vietnam, that the contractor did not hand over the project credentials to the IT wing of the NBR.

"FPT is extremely non-responsive on any technical query. It is not in a position to hand over any substantial output," Bhuiyan wrote in the letter to the ADB on 1 January.

The letter referred to an investigation into the BITAX by the IT team of the NBR and said the audit found that the system would not bring the desired outcome and failed to meet its goals.

The reasons, he pointed out, for the failure included keeping the archaic system of return processing. He suggested the ADB investigate the matter.

BITAX was one of the two components of the project and the NBR spent $7.5 million to develop the software and buy required hardware for its 650 field-level tax offices.

Another component was the digitalisation of the land records management system in selected districts and $12.7 million was spent for the component.

The government took the project in December 2011 to facilitate the online filing of tax returns to improve tax collection and establish an efficient, fairer and less corrupt tax system and improve public service delivery.

The tax administration introduced e-filing facility in November 2016 and FPT operated and maintained the BITAX for three years until November 2019.

ADB RATED THE PROJECT SUCCESSFUL

The Manila-based multilateral lender did not respond to Bhuiyan's request for inquiry.

In a draft project completion report in May sent to the Economic Relations Division and the NBR, the ADB sang for the project, titled 'Strengthening Governance Management Project, for which it footed 86 per cent of the $20 million cost.

"Overall, the project is rated successful," said the draft report.

The lender said the project was highly relevant at appraisal and completion. It rated the project as "less than effective" in achieving the outcome and output envisioned at appraisal.

Of the performance indicators, the establishment of the facility for online submission of tax returns for all taxpayers in all income tax offices has been achieved. However, the goal of ensuring online filing of at least 75 per cent of large taxpayers was not achieved.

Besides, only a small percentage of the taxpayers -- about 6,000 or 0.33 per cent of the 22 lakh returns submitted in fiscal 2019-20 -- submitted returns through BITAX.

"Thus, the contribution of the online return filing was not significant in income tax collections," the lender said.

More time is needed for taxpayers to gain confidence in the online tax return filing, it said.

"Online filing of tax returns would in due course enhance the efficiency of the tax machinery and help expand the tax base, lower tax evasion and ultimately lead to higher tax collection."

The modules of e-payment and tax deduction at source were not included in the design of BITAX due to weak internet services in the country at the time of project preparation, the ADB added.    

IMED FINDS TAXPAYERS NOT TAKING TO BITAX

Just a month after the ADB's report, the Implementation Monitoring and Evaluation Division (IMED) under the planning ministry released an impact evaluation report on the project.

The report, which was released in June, said the implementation of the project has made online filing of tax returns possible. The primary stage of establishing transparency and accountability in the tax department has been established.

"However, the main problem is lack of acceptability among taxpayers."

The report also said FPT did not hand over the whole system to the NBR although the project had completed in 2018. The total bill was paid before the full handover.

The Vietnamese firm won the Tk 51 crore contract to develop the BITAX software and supply hardware to the tax offices.

The IMED said the software and hardware were purchased on a turn-key basis under the project because of a lack of knowledge of BITAX.

"But the software implementing agency implemented the tax system partially taking advantage of turn-key contract."

Only tax returns of individual taxpayers were uploaded and it was not possible to upload the returns of all categories of taxpayers, it said. No option has been kept for submission of withholding tax and advance income tax return.

The IMED alleged that the contractor and its technical team were accessing taxpayers' confidential information but confidentiality of such information is protected by law.

"It is a threat to the safety of the secret information of the state, which is not acceptable at all."

Tax returns contain information of wealth, income and expenditure of citizens. The returns contain income tax-related information of the president, the prime minister and other very important persons.

"It is essential to ensure the safety in preservation for the sake of ensuring the confidentiality of taxpayers' information," the IMED said.

The report recommended the NBR decide on the usage or application of the system as BITAX was implemented partially, was not expandable and there is a scope for uploading faulty information and susceptible to abuse.

The NBR can't operate BITAX without the help of FPT at present, the IMED report said, while calling for taking full control of the system.

Accordingly, the NBR took an initiative after the end of the service agreement with FPT. But there was a dearth of sincere effort from the contractor to hand over the system.

In April 2018, an IMED official inspected the implementation of BITAX and submitted a report the following month.

The report said the project did not begin on schedule owing to a lack of coordination between local and international consultants. 

The project implementation phase was apparently successful but there was no scope of e-payment, it said. 

NBR'S REPORT TO IMED: 'PROJECT SUCCESSFUL'

Just a year before the release of the IMED's report, the NBR had submitted the project completion report to the IMED. It came in May 2019.

The NBR report said the implementation of the project was successful.

The project has been successful in introducing digitalisation of the NBR's tax revenue management through installation of BITAX, Bhuiyan said in his remarks.

"A follow-up project is needed to complete the remaining task of full automation of the tax administration," he said.  

The completion report, in contrast to the IMED's report, said BITAX, which is based on SAP Integrated Tax Revenue Management, is easily configurable, standardised and able to support the full tax lifecycle management.

It, however, said engagement of the local IT team was minimal due to the lack of ownership, inadequate team members and lack of proper skill sets.

The report also identified drawbacks such as taxpayers' hassle in collecting password for online return filing, absence of e-payment facility and interfacing with other government agencies such as the Bangladesh Road Transport Authority (BRTA), the Bangladesh Bank and the Controller General of Accounts (CGA).

NBR RESPONDS TO IMED'S LATEST REPORT

The IMED's latest impact evaluation report did not mention the findings of the previous reports on BITAX and the versions of the NBR, the ADB and FPT.

In the middle of June 2020, Hafiz Ahmed Murshed, member for tax information management & services of the NBR and director of the BITAX, raised questions about the IMED's report.

In a letter to the IMED Director General, he said: "There is a lot of factual errors in the final draft report, which is undesirable. The errors need correction before finalising the report."

He blamed the absence of the scope for tax payment through online. E-payment was not deliverable in the online tax return filing project.

On the IMED's findings on making full payment before the handover of the system, the NBR's letter said the payment was done in line with the ADB's clearance and against a financial bond from the contractor.

It acknowledged the problem of matching records of tax payment with other state agencies. FPT handed over user administrator and password with the account information through a letter on 17 December 2019.

The NBR letter, however, did not clearly refute the claim that data is accessed by FPT. It only said that it is a normal practice that passwords changed after the handover. Murshed did not clear whether the passwords had changed.

He said a seven-member IT team of the NBR has been assigned to operate and maintain BITAX after the expiry of the contract with FPT.

Bhuiyan was misguided to present wrong information about the BITAX on the verge of his retirement, he said.

It warrants probe into the intention of sending the letter, Murshed added.

WHAT THE TAXMEN SAY

The correspondent spoke with a dozen taxmen, including four income tax members who headed the BITAX project on several occasions until now and three IT officials of the NBR.

All agreed that the e-filing of the tax return was not user-friendly enough to make online filing popular among taxpayers.

The ADB said BITAX has been fully operationalised, and 650 tax circles have been connected. Some 44,000 taxpayers submitted online tax returns in fiscal 2017-18.

The number of online returns dropped to 2,700 in fiscal 2018-19 and eventually rising the following year.

Taxmen agreed that some facilities are absent in the system. This includes e-payment and the scope to verify taxpayer's tax payment claims electronically with other agencies such as the BB and the CGA.

Some taxmen, including a former project director, said as manually submitted returns are digitalised for uploading in the BITAX system, the risk of entry of errors in the data remains high.

The tax offices digitalised nearly 27 lakh manually submitted tax returns since the launch of the e-filing.

"Data entry makes a lot of irritation for officials in the fields. We have to digitalise the manually submitted returns. It takes a lot of time. This is one of the reasons officials have a negative perception about the system," said a deputy commissioner of taxes.

There should have been a scope to scan and digitalise the returns directly. "We have scanners but it is for scanning supporting documents and not the main tax return," he said.

CAPACITY BUILDING OF IT TEAM OVERLOOKED

IT officials said they were not trained enough to take full control of the system from the Vietnamese firm, maintain and operate it. 

One official said they could not enter the system using the passwords given by FPT.

Another official said the issue of providing adequate training to build the capacity of IT personnel to run BITAX after the end of the contract was not given enough importance.

There was also no provision of knowledge and technology transfer in the project and the vendor took that advantage, he said.

TAXMEN DIVIDED ABOUT THE OUTCOME OF THE PROJECT

One view is that BITAX could not yield any fruitful result for e-filing and it is better to discard the system as the database is prone to error.

Another view was to address the bottlenecks to make the system user-friendly and more functional.

WHAT IMED, OTHERS SAY

Md Afzal Hossan, a director general of the IMED, said there were differences of opinions on the project's success.

"We will take into account both the opinions in our final report and give our recommendations. Now, it will be up to the authority to deal with it."

He, however, added that most of the observations of the IMED would remain the same.

The IMED official, responding to the ADB's report terming the project successful, said: "We have not termed the project unsuccessful. What we said is that the management is still in the hands of the Vietnamese company."

FPT did not respond to an email. The ADB did not respond to request for comment.

Bhuiyan said the project was in its last stage when he joined the NBR and he got an impression from the officials involved in the project and from visits by the ADB representative that the project was going well.

"And when the contract was set to expire and the proposal for an extension came, I asked for progress and deliverables. I came to know that returns can be submitted but payment cannot be done electronically. It was annoying."

Bhuiyan said he asked FPT for deliverables and submission of all credentials.

"Then I wrote to the ADB for taking action against them."

He said he held many meetings before writing the letter.

On making full payment to FPT in May 2019, the former NBR chief said: "If you blame me for this, I will have nothing to say. But no one would be able to know anything unless I raised the questions. All would know that the project completed well."

On his remark as 'successful' in the project completion report, he said this is a common outline and the project completion reports are required to be sent to the IMED.

No authorities submitted to the IMED call projects unsuccessful in the reports, he said.  

The former NBR chair disagreed with the IMED's findings that FPT was accessing taxpayers' data.

Only former finance minister AMA Muhith would submit his return online and other files were submitted manually, Bhuiyan said.

WHAT'S THE NBR'S TAKE?

When the IMED released the report regarding the BITAX, the NBR had already embarked on popularising the online tax return filing. For the first time, it offered Tk 2,000 rebate to motivate individual taxpayers to submit returns online.

Amid a debate over of the efficacy of the system, the tax administrator, on July 16, formed a seven-member panel, headed by Murshed, to prepare an action plan to complete the system to facilitate online filing.

At a meeting on 22 July, NBR Chairman Abu Hena Md Rahmatul Muneem, who took over on 6 January, asked officials to identify the shortcomings so that the system could be made functional.

The NBR is also considering signing a two-year contract with FPT for maintenance and operation of BITAX and introduce new programmes, Murshed said.

"If we give the contract to a new firm, a lot of time will be lost for them to begin with and cause a delay. Already we have started working with FPT and it has some samples of the home page."

Steps would be taken to enhance the skills of IT staff so that NBR can take control of the project, he said.

"We could not look after the whole system as soon as the project ended. That is why they have been with us. We will take the control once our skilled manpower is ready," he said.

A final decision over the extension of the contract with FPT is likely to come early next month.