Reform NBR, policies for better tax-GDP ratio

The government should develop a progressive tax system that ensures the efficient redistribution and use of resources to address inequality in the country, according to speakers at a webinar.

Although numerous tax reforms have taken place over the past few decades, none of them have brought significant changes to the country's tax efficiency, productivity and fairness, they said.

The webinar styled "Revenue Mobilisation Program for Results; World Bank supported VAT Improvement Projects in Bangladesh" was jointly organised by Sushasoner Jonny Procharavizan (SUPRO) and Oxfam Bangladesh on Wednesday.

The speakers went on to say that Bangladesh's narrow tax base, widespread tax evasion, exemptions and administrative inefficiencies are the main reasons behind the country's low tax-to-GDP ratio compared to its South Asian peers.

Marc Cohen, a researcher of Oxfam America, Mohammad Shahid Ullah, a researcher of SUPRO, and Nasiruddin Ahmed, former chairman of the National Board of Revenue (NBR), presented a study on the "Aid to Pro-Poor Domestic Revenue Mobilisation: The World Bank's Revenue Mobilisation Program for Results in Bangladesh".

They said the existing tax policies are failing to address the challenges of inequality while the preponderance of indirect taxes is the root cause of this situation.

This highlights a multitude of problems in the existing tax system, they added.

Tax avoidance is a major problem in the country as some businesses who collect value-added tax from consumers end up evading the tax by under-reporting it while importers avoid it by under-invoicing.

Besides, the tax system is unnecessarily complicated due to age-old corruption and incompetence, preventing a level playing field for taxpayers.

Under the existing system, people get demoralised when they see rich people and big companies not paying their taxes properly.

The NBR does not even have a comprehensive database linked with different business licences and registrations, according to the study.

The efficiency and capacity of the tax administration are not updated due to the lack of modern ICT solutions and automation while poor people have no idea that they pay taxes every day, it said.

So, the NBR should develop a strong database on potential taxpayers that is fully equipped with modern ICT tools and techniques to collect real information to assess each individual's or company's tax liabilities. Besides, the tax return process should be made easy and simple, it added.

Addressing the event as chief guest, Planning Minister MA Mannan said a low tax-to-GDP ratio means that there is something wrong with the tax system.

"This is because, upon failing to ensure adequate tax collection, we have to reach out to both domestic and foreign lenders and end up bearing the burden of debt," he added.

So, there are some strange rules and policies in place that need to be cleared up and reformed while the NBR needs to be further modernised.

Highlighting some complications in the existing tax system, Aroma Dutta, a member of parliament, said this is a highly technical subject that is not fully understood by the general people.

"The current system is not applicable for us at all. Without imposing the law, this should be made people-friendly and pro-women," she added.

Atiur Rahman, former governor of Bangladesh Bank, said: "We pay only 9 per cent of the GDP as tax but there is no shortage of people to pay taxes in the country. The main problem is that we are not able to bring them under the tax net."

"We need to expand the range of our tax culture. The tax system needs to be further digitised and the NBR should be reformed," Rahman added.

Tawfiqul Islam Khan, senior research fellow of the Centre for Policy Dialogue; Dipankor Datta, country director of Oxfam; Muhammad Abdul Mazid, former NBR chairman; Kazi Farid Uddin, first secretary of VAT Policy at the NBR; and Mohammad Soeb Iftekhar of Oxfam Bangladesh spoke at the programme, moderated by SUPRO Chairperson Abdul Awal.