Checking tax evasion and avoidance, reviewing tax exemption with implementing reforms in tax management and adopting other tough techniques to realise outstanding taxes could be a good strategy for the National Board of Revenue (NBR) to minimise the gap in revenue target and collection, experts said.
"NBR collects revenue. If there’s no income and expenditure and import, then it’ll definitely have an impact on revenue collection and that means the revenue collection will shrink… this is natural," former NBR chairman Muhammad Abdul Mazid told news agency UNB.
Abdul Mazid said this is obvious that the NBR will not get enough revenue from a fragile economy because the economy is set to have the internal haemorrhage as it is not moving.
He said steps should be taken to make the economy move, by providing jobs to a large number of people including those who have turned unemployed, so that their purchasing capacity remains stable.
"The NBR’s task is to make sure the economy is running properly. To make that happen, it can reduce the tax rates," he said.
Mazid put emphasis on going for expansional measurers to put the economy back on track. "For that, NBR could give tax incentives where it is needed aiming to take the economy to its previous pace. Only then it could have its revenue."
About dues from various public offices for many years, the former NBR chairman advised to be tough. "The NBR has to be tough and rude, or else, they won’t get the revenue from them."
He also mentioned that the NBR should also be rude against tax evaders.
About the pending cases in courts involving billions of taka, he suggested expediting the case disposal process.
Mazid said the NBR has to adopt the 'give-and-take' approach first after the COVID-19. "Because, they’ve to give chances to businesses to do their business first… there’s no scope to be stubborn."
Rashed Al Mahmud Titumir of Dhaka University’s Development Studies put emphasis on checking tax evasion, tax avoidance and reviewing tax exemption.
He said there are huge undocumented foreign nationals working in Bangladesh.
On 5 February this year, Transparency International Bangladesh in a study showed that an estimated $3.1 billion, or about Tk 26,400 crore, is being siphoned off every year by foreign nationals employed in Bangladesh.
About 160,000 foreign nationals gainfully employed in Bangladesh after entering the country with tourist visas, said the report titled “Employment of Foreigners in Bangladesh: Challenge of Good Governance and Way to Overcome”.
Typically, foreigners enter Bangladesh on a three-month tourist visa and manage jobs soon afterwards given the shortage of people with strong communication and management skills, which are in high demand in the garments sector that has gone on to become the world’s second largest supplier of apparel. Their salaries are paid fully in cash or to bank accounts abroad, depriving the government of the due taxes.
According to the report, 90,000 foreigners are working in Bangladesh following the due procedures and about 41 per cent of them are from India, followed by China, Japan, South Korea and Malaysia.
To evade taxes, the salaries of legal foreign workers are shown less in the official documents than their actual income.
Rashed Al Mahmud said these undocumented workers are working in a handful of organisations. So, it is easy to find them out.
He also mentioned that the foreigners working here legally or illegally have to pay tax at the flat rate of 30 per cent. “NBR could try to get money from this pocket at first."
Regarding tax avoidance, Rashed said although the government has formed a transfer pricing cell, there is no progress in this cell. "NBR could study the transactions of multinational companies."
The DU professor also put emphasis on reviewing the existing tax exemption whether these business entities really need this waiver or not. "With this, the NBR could get a good amount of money quickly."
Besides, he said, the NBR can settle down the disputed matters with the taxpayers through the arbitration process and take steps to dispose the cases in various courts.
South Asian Network on Economic Modeling (SANEM) executive director Selim Raihan said the revenue collection will not be as per expected level in the next two years. "The Tax-GDP ratio in the country is below nine per cent, it’ll go below eight per cent and the budget deficit is likely to be 8-10 per cent."
He mentioned that NBR can carry out its reforms at this time to remove the bottlenecks of revenue collection. In this connection, he mentioned about the VAT law and Income Tax Law.
"This is the right time to take preparations… the NBR can look at itself, they can do their assessment where are the hurdles, how these can be minimised, and what will be the strategy to implement these reforms," he said.
He said a large number of people remain outside the tax net and this time the NBR can do its home works properly to bring them under the net.
"The NBR should go for a self-assessment, but not following the traditional methods. It should also go for scenario analysis and think about what it will do if this crisis prolongs," Selim said.