The proposed budget envisages reforms in the existing taxation system and seeks to strengthen the National Board of Revenue further.
A five-year NBR Modernisation Plan has been proposed with an aim to reform the tax policy and the tax administration.
The government also moves to scrap tax exemption on incomes of the prime minister, speaker, lawmakers, judges of higher courts, and other government officials.
Besides, the Alternative Dispute Resolution (ADR) system will be put into practice from fiscal year 2011-12 to ensure prompt collection of the dues. It also proposed reducing different taxes and rationalise tax slabs.
However, the government has not addressed the businesspeople's demands of rationalising corporate taxes, lowering VAT rates and reducing tax rates at sources.
“Difficult tax laws remain the NBR's main problem. They need to be simplified and made taxpayer-friendly. The major objective of any reform measures should be to rid taxpayers' mind of fear,” said Hossain Zillur Rahman, former adviser to caretaker government.
“The government has to ensure that its incentives reach different sectors through its policy measures. The government expedites a sector's growth by exempting it of taxes or providing incentives to that industry,” he said.
The NBR Modernisation Plan includes raising the Tax-GDP ratio, initiating web-based services, and settlement of 80 percent tax-related cases by 2016.
The reform proposal seeks to increase tax-GDP ratio to 13 percent by 2016 from 9.3 percent now, and correct the flaws in the revenue collection system.
The government plans to launch web-based services for e-registration, e-filing, tax-return, declaration submission, tax payment and rebate by 2016 in the hope that it will help accelerate revenue collection.
Asif Ibrahim, president of Dhaka Chamber of Commerce and Industries, said the government should adopt a business-friendly taxation system.
“Most of the time, the taxation system seems unfriendly to entrepreneurs, and budget hardly makes any difference to that situation. The government should ensure that local manufactures and entrepreneurs get necessary support,” he said.
“The government has to ensure that businessmen are not harassed by any taxmen,” Asif said.
The draft of VAT and Direct Tax Act 2011 has been finalised, and will be placed before parliament by December.
The government plans to expand all three departments of the NBR to enhance its capacity further.
The NBR will set up several departments -- Customs Excise and VAT Commissionerate, Appeal Commissionerates, and two extra benches in the Appellate Tribunal.
Moreover, the Alternative Dispute Resolution system will be made effective from fiscal 2011-12 to swiftly collect dues of Tk 8,000 crore stuck in lengthy court procedures.
The ADR, an out-of-the-box legal framework, will enable authorities to resolve cases through mutual understanding and negotiations. In this system, both parties compromise on certain aspects to strike a balance.
Nearly 19,000 NBR-related cases now remain pending with courts.
INCOME TAX REFORMS
The government has rolled out an expansion plan for the income tax department. The NBR will recruit staff soon in line with the plan.
It also suggested recruiting income tax practitioners and training them.
The government proposed to bring down tax on savings instruments to 5 percent from existing 10 percent considering inflation and the interests of small investors.
It suggested extending the tax holiday period to June 2013 from June 2011 in different sectors.
VAT REFORMS
The government has initiated reducing turnover tax on the SMEs to three percent from existing four percent. The annual turnover margin remains at Tk 60 lakh as before.
Companies listed under the turnover tax like those under VAT will be given business identification number to allow them to participate in export and import trading.
Besides, the government has proposed increasing supplementary duty on imported electric fan to 30 percent from 20 percent, and slapped 20 percent supplementary duty on electric multi-cord, switch and socket to support SME industries.
The finance minister proposed making the VAT law more tax-friendly by reducing penalty for evading VAT. He suggested that the maximum penalty should be the amount equal to one and a half times of the evaded revenue in place of the existing two and a half times of the evaded amount.
According to the proposal, the NBR should take quick steps to improve its human resources by providing training to its employees and recruiting staff in its 18 tax zones across the country. The NBR has already recruited 72 staff for the VAT section.
It will set up two tax information and service centres in Dhaka and Chittagong next month to help the country's one million taxpayers file their tax returns without any hassle.