Amnesty for TIN holders yet to file tax returns

TIN holders, who are yet to file their tax returns, will be exempted from paying fines for previous years if they file returns in the upcoming fiscal 2022-23 as the government is expected to announce the amnesty in the next budget.

This will create an opportunity for about 50 lakh TIN holders to submit their tax returns without any penalty, according to sources at the National Board of Revenue (NBR).

Experts believe such a move would be positive and timely as well as increase revenue earnings and contribute to ensuring discipline in the country's financial sector. They say many, despite having tax identification numbers (TINs), have been reluctant to file returns fearing harassment and fines.

Infographic: TBS

At present, the number of e-TIN holders in the country is over 75 lakh, of which two-thirds do not file income tax returns. In the last 2021-22 tax year, a little over 25 lakh eTIN holders filed tax returns.

It is compulsory for individuals with over Tk2,50,000 of yearly earnings to avail a TIN. Besides, tax filing has been made mandatory for people under 37 categories while three categories are exempted from filing tax returns if they do not have a taxable income.

Sources at the NBR's income tax department said they could not trace 26 lakh TIN holders and these people have been categorised as "TINs suspended, not cancelled". In future, in the event of them availing any services, which are integrated with the Income Tax Department, they will be identified.

Until two years ago, only those who had taxable income were obliged to file returns. Currently all TIN holders are required to submit their returns. However, return deposits are not growing at the expected rate.

In addition to individual taxpayers, the Registrar of Joint Stock Companies and Firms (RJSC) has about 1.75 lakh registered companies, of which less than 30,000 submit returns.

According to budget sources in the finance ministry and the NBR, individual TIN holders who have never filed a return or who have filed returns once or twice but have not filed returns for several years, will not be charged any penalty for previous years if they file tax returns in the next tax year.

Md Alamgir Hossain, a former member of NBR, who was engaged in last FY's budget preparation, told The Business Standard, "Such an offer would be very positive for both the taxpayer and the tax department. TIN has been made compulsory in several sectors. But the return is not coming. If the return does not come, then what is the benefit with TIN? For this, the field level offices offered to waive the fine for one year."

If they can be fined and taxed with a one-year fine amnesty, their assets will be recorded with the NBR. This will create opportunities to bring discipline in the tax sector, he added.

Syed Md Aminul Karim, a former NBR member, also said the initiative, if taken, would be positive.

"People became reluctant to file returns fearing fines and harassment. Waiving the penalty will benefit both the taxpayer and the revenue department," he said.

Bangladesh is one of the countries, lagging the most in the world in terms of tax contribution to GDP. Almost all South Asian countries are above Bangladesh in tax to GDP ratio. Bangladesh is slowly falling behind in this regard. At one time the tax-to-GDP ratio was 10%, but according to the latest fiscal year 2020-21 data, it has fallen below 8%.

Abul Maal Abdul Muhith, during his tenure as finance minister, said at least 2 crore people in the country could afford to pay taxes. But at that time the number of return submitters was about 17 lakh.

What the law says and the reality

According to section 124 of the existing Income-tax Ordinance, any person who has, without reasonable cause, failed to file a return of income, will have to pay 10% of previous year's assessed income, or Tk1000, whichever is higher and Tk50 for each day. The penalty will not exceed over 50% of previous year's payable tax.

For people who have not previously filed tax returns the penalty shall not exceed Tk5,000.

However, the Deputy Commissioner of Taxes (DCT) holds the authority to impose the minimum penalty in this case.

Speaking to field level officials of the Income Tax Department, it was learned that although the law mentions fines, it does not say what the minimum will be. As a result, field-level officials sometimes make decisions that are convenient for them, at which the taxpayer becomes unhappy, on the other hand if they pay a very small fine, they have to face questions from the tax office.

Under this current system, there is also an opportunity for irregularities.

An NBR field-level DCT, on condition of anonymity, told The Business Standard that tax returns are usually waived for taxpayers who start filing returns for the first time.

Former NBR member Alamgir Hossain said that in case of low tax, the officer will be naturally questioned.