Tax compliance won't improve without spending transparency: Economists

Tax compliance among the public will not improve unless transparency is ensured in how tax revenues collected from people are spent, economists said at a seminar in Dhaka today (21 January).

"As long as people can't see where the money collected from them is being spent, tax compliance will not develop," said Rashed Al Mahmud Titumir, professor at the Department of Development Studies of the University of Dhaka, at the seminar held at the Bangladesh Development Bank Limited (BDBL) building.

Titumir said taxpayers want to know whether their money is being spent for their benefit. Stating that people have lost trust in the revenue system, he said, "This is because there is no fairness in it."

Masud Khan, chairman of Unilever Consumer Care, raised similar concerns. "What do I receive in return for the tax I pay? In other countries, taxpayers receive many services for free," he said. 

"If people could understand that paying tax brings them benefits, they would be more willing to pay," he added. 

He said only 20% of tax-eligible people in the country currently pay taxes, while the burden created by the remaining 80% who do not pay falls on that 20%.

Participants said corruption and mismanagement in previous governments led to the wastage of taxpayers' money. They also criticised the National Board of Revenue's policy of collecting minimum tax, arguing it undermines fairness. It was noted that Bangladesh is the only country where minimum tax is collected in this way.

Minimum tax refers to tax deducted at source at a fixed rate. Even if a company makes less profit than the tax deducted – or incurs a loss – the deducted amount is not refunded. Speakers said this goes against the basic principle that tax should be paid on income, and that companies often face an effective tax rate higher than the official corporate tax rate.

Online returns

Masud Khan, also described the current online tax return filing system as difficult and confusing, contradicting repeated claims by National Board of Revenue Chairman Abdur Rahman Khan that it is easy.

After the event, Khan told The Business Standard, "My son lives in the US, where tax returns can be filed very easily." 

"I asked for his help after failing to complete it myself. He said it was very complicated, and eventually even he could not do it," he added. 

The NBR chairman has said at different programmes that "Anyone who can click the 'Like' button on Facebook can fill out an online tax return."

Khan said even after submitting a return, individuals and companies often do not know whether it has been finally accepted. 

"After submission, the return may still be selected for audit by the commissionerate, tax intelligence, or the Central Intelligence Cell. Even after that, it may again be audited. As an assessee, I do not know when my return will finally be accepted," he said.

During the event, he highlighted various concerns and objections raised by businesspeople regarding Bangladesh's tax, customs, and VAT systems.