Unlike other countries, the indirect tax has become the main sources of the revenue putting aside the direct taxes.
Analysts said governments are reluctant to impose direct taxes, especially income tax on apprehension of reprisal from the voters.
Additionally, shortage of tax authorities’ manpower, lack of skills and monitoring as well as political willingness fail the government to meet its revenue target.
Bangladesh has witnessed on an average 17 percent growth in revenue collection over the past decade – highest in 40 years. The National Board of Revenue (NBR) is tasked with 85 percent of the total revenue.
Value added tax (VAT) accounts for most of revenue, followed by income tax.
The NRB collects the revenue from four tax sources - income tax, , value added tax (VAT), duty and excise.
In the revised budget for 2017-18 fiscal, the government set its revenue target at Tk 2.25 trillion, fixing a Tk 830 billion target from VAT and Tk 780 billion from other sources including income taxes.
The government has proposed a revenue target of Tk 3.39 trillion in the budget for 2017-18 fiscal, It sets a Tk 1.11 trillion target from VAT and Tk 1.02 trillion from other sources including income taxes.
Analysts said the government emphasises VAT because of the people’s attitude towards paying income taxes.
“The culture of taxpaying has not been developed enough and the authorities concerned are yet to be fully prepared in this regard,” said NBR chairman Mosharraf Hossain Bhuiyan.
Citing VAT comparatively easy to collect, the NBR chief said, “Recently, a tendency to pay taxes has been increased among the youths.”
“The tax regulatory body has begun searching new tax payers as part of the government’s multiple initiatives to raise revenue from taxes,” he said.
At present, the number of registered tax payers stands at 3.4 million across the country, informed the NBR chief.
But, analysts argued that this figure represents a very small amount against the vast 160 million population of the country.
A former caretaker government adviser AB Mirza Azizul Islam said, “Tendency to pay tax is very low among the people in Bangladesh and the government lacks in its skill.”
“Besides, the government finds the VAT collection easier so, VAT has turned into the main sources of the revenue,” said Islam, who was an adviser to the 2007-08 caretaker government.
No government pays heed to the income tax sector as politicians fear that if they deal with it they may lose their popularity.
In contrast to VAT, the income tax directly affects the people’s earning. So, income tax always remains out of the politicians’ manifesto.
Speaking to Bangla Tribune, Finance Minister AMA Muhith said, “The government has planned to increase the number of registered tax payers to 10 million and number of income tax returns submission to 8 million within the next five years.”
The octogenarian politician, however, sees a positive message coming from the youth generation, especially those are under 40 as they pay taxes spontaneously.
“Income tax will become the main sources of the revenue replacing the VAT in near future,” Muhith hopes.
Economist, however, set aside the government’s repeated claims on increasing the NBR’s capacity.
“The NBR lacks in manpower and skill to increase the number of the income tax payers,” said Dr Salehuddin Ahmed.
Advocating for expanding tax net,” Ahmed said, “the NBR takes a shortcut way to collect revenue and come after the people who pay taxes regularly.”
“The easy way to expand tax net is to find new tax payers. Of course, all TIN (tax identification number) holders don’t pay taxes. But they (NBR) don’t need to go door to door.
“The NID (national identity) has all information where NBR can learn whether the TIN holder is eligible to pay taxes,” said Ahmed, who was a governor of Bangladesh Bank.
Blaming the tax authorities for failing to reach all tax payers, Ahmed, said, “Even an owner of the grocery shop takes Tk 50 million in loan on purpose of business expansion.”
“So, numbers of tax payers have in district, upazila and village-levels. But, they (NRB) aren’t going there,” he said.