Aligning taxes with social security will significantly surge our revenue

Published : Tuesday, 7 February, 2023 at 12:00 AM

On Sunday, the first-ever two-day Revenue Conference in Bangladesh began with the goal of developing the revenue management system. A nation’s capacity to fund social services like healthcare and education, vital infrastructure like roads and electricity, and other public goods depends heavily on its ability to collect taxes. The National Board of Revenue (NBR) is in charge of collecting the nation’s various taxes. Although revenue is crucial for the development of the nation, it is still crucial to balance revenue with social security for the populace.

Charges are levied by governments against its people and businesses to generate revenue that is then used to fund their financial priorities. This entails funding governmental and public initiatives as well as improving the nation’s business climate to promote economic growth. Taxes are essential because governments use the funds raised to fund social programs. Taxes can also impact a nation’s rate of economic expansion. The gross domestic product (GDP) of a nation is typically influenced by taxes.

In order for businesses to prosper, the nation needs a good infrastructure, including roads, embankments, power, etc. Governments invest the tax revenue they receive in the construction of this infrastructure. Because governments can reinvest this money in the economy in the form of loans or other forms of finance, the concept of taxation is crucial to businesses. As an example, we saw how the Bangladeshi government used a sizable fund to stimulate several industries, particularly agriculture, during the COVID-19 pandemic. Taxes contribute to a nation’s improvement in living standards. The degree of consumption is most likely to be higher if the standard of living is greater. When there is a need for their goods and services, businesses usually flourish.

While launching the Revenue Conference on Sunday, Prime Minister Sheikh Hasina urged the citizens to pay their taxes, highlighting the necessity of raising revenue income and widening the tax base in light of the present global economic crisis. Instead of raising tax rates, the prime minister urged the relevant authorities to expand the tax net. She also urged them to launch a nationwide awareness campaign to encourage individuals to pay their taxes.

In South Asia, Bangladesh has the lowest tax-to-GDP ratio. According to a recent survey by the Centre for Policy Dialogue (CPD), about 68% of those with taxable income did not pay any taxes to the government. As of June 30, 2022, there are more than 7.4 million e-TIN holders. Only 2.3 million of them had filed tax returns in the previous fiscal year. On the other hand, a sizable portion of e-TIN holders had submitted zero-tax returns, indicating that they had paid no tax.

To assist the government generate more revenue, the NBR must keep widening its tax base. Finding out the causes of people’s resistance to paying taxes will be crucial at the same time. For the fiscal year 2022�2023, the NBR raised its revenue collection target by 12%. Many experts believe that the aim of Tk. 3,70,000 crore is an ambitious one to reach given that NBR was unable to reach its Tk. 3,30,000 crore objective for the previous fiscal year. Value-added tax (VAT) and customs duty collections are expected to total Tk. 1,36,900 crore and Tk. 1,11,000 crore, respectively, representing 37% and 30% of overall revenue projections.

Despite significant underperformance relative to the plan, the NBR generated Tk. 3.01 trillion in revenue in FY2022, representing a strong rise of 16.09%. Out of the total revenue the NBR collected during the previous fiscal year, Tk. 894.23 billion came from customs with a growth of 15.9%, Tk. 1.08 trillion from VAT with a growth of 11.9%, and the remaining Tk. 1.03 trillion from income tax and travel tax with a growth of 21.79%. The NBR’s revenue collection fell 8.6% short of the budgetary objective, although given the slow growth and the state of the world economy in the wake of the COVID-19 epidemic and the Russia-Ukraine War, one cannot characterize the growth as poor.

It is regrettable that most of our people do not want to pay taxes, whether they are income taxes or VAT. We cannot entirely place the blame on the populace. First of all, the tax office frequently subjected people to multiple forms of harassment. Instead of concentrating on the wealthy groups who do not properly pay taxes, our government frequently makes life challenging for ordinary folks. Second, the widespread corruption in government, particularly the tax authorities, frequently deters people from paying taxes. Third, citizens should obtain public services in exchange for paying taxes. However, our public workers do anything but work for the people; instead, they frequently harass the populace. Lastly, the benefits in the form of social security are completely missing in our tax system.

Paying taxes is a way to save money in many developed nations because the government provides substantial assistance to citizens who are disabled, retired, dead, or jobless. Additionally, even their less fortunate inhabitants are guaranteed access to health care and education in those nations. We have observed that many foreign governments return the VAT they have collected from travelers as they depart the nation. Because they solely collect VAT from citizens, the governments are not required to provide any social security-like services to those tourists. However, this is not the reality in Bangladesh as service and tax is not synonymous here.

In addition, VAT was implemented in Bangladesh on July 1st, 1991. In theory, even a poor person pays the VAT when buying any goods, making it the government’s biggest source of income. However, the issue is that many vendors do not correctly pay VAT, and even clients in our nation do not request a VAT receipt in order to pay a little less. The revenue would have increased significantly and might possibly surpass the goal if the VAT loss could be minimized. The alignment of social security payments with VAT is crucial for both the buyer and the seller.

The government of Bangladesh should take a program that, whenever a citizen pays tax that will be documented against his NID or social security card. The VAT on every purchase should also be recorded for each taxpayer against his NID or social security card. A taxpayer will get compensation in lieu of the taxes he has already paid when he becomes handicapped, retires, or loses his job. If a taxpayer dies with dependent family members, then they should receive benefits from the government.

In order to fund social security for its residents, the government should set aside 50% of its earnings for spending and the remaining 50% for investment. If it does, paying taxes will appear to be a savings, which will motivate residents to do so. Only providing certain facilities to the CIPs or Tax-Champions is not going to help. While we target to bring the ordinary citizens under tax net, we must also ensure social security and services for them.

We should not terrify our citizens to pay tax like we have seen on different occasions. If we cannot make our citizens eager to pay taxes, then they will look for tax heavens outside the border and trouble like money laundering will keep increasing. We must create a system which will enable the citizens to find paying taxes as a benefit. It will also reduce the financial corruption drastically as the citizens themselves will become advocates of revenue collection.

Under the astute leadership of Prime Minister Sheikh Hasina, Bangladesh has evolved over the past decade into a development role model. We began our path toward a �Smart Bangladesh� from �Digital Bangladesh�.  To continue with that development, the citizens must contribute to the future of this country. We believe that if we can secure social security for the citizens, they will pay taxes willingly and greatly contribute to the development of the country.

–    The writer is Chief Editor at Mohammadi News Agency (MNA), Editor at Kishore Bangla and Chief Patron, BangabandhuShishu Kishore Mela

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