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Tax collection burdensome for ordinary taxpayers

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06th-Jul-2019       
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Kazi Zahidul Hasan :
Analysts, individual taxpayers and businessmen have urged the government to build a fair tax system in order to encourage and support all taxpayers in complying with their obligations.
Terming the current tax system as 'arbitrary,' they urged the government to design a fair tax system that is equitable for all taxpayers.
They also raised the issue of mass harassment by taxmen in the name of tax collection.
"The current tax system is arbitrary and riddled with anomalies. Even, the innocent individuals are harassed by the taxmen in collecting tax," Monir Hossain (not real name), who has been paying tax for the last several years, told The New Nation.
"So, expansion of tax net should not be a top priority, rather it should be reforms."
"We are paying tax for nation building, but getting no return," said taxpayer Raju Ahmed.
He said: "I am paying 15 percent tax on my income. The government spends most of my tax money for public servants, but citizens are getting no service. Most of the public servants are stated to be involved in corruption despite big hike in their salaries.     
"None can get service from them without bribes."
Anyone who earns Tk 21,000 a month from July this year will come under the tax net.
"The government is setting highly ambitious tax collection target and it troubles the taxpayers. Even, the tax officials become harsh to taxpayers while meeting the collection target. This may be raised the harassment allegation," said former NBR Chairman Dr MA Mazid.
 "Action needs to be taken against taxmen for their 'oppressive' acts," he said adding the NBR officials must treat all taxpayers fairly to strike the right balance while challenging tax avoidance, evasion and other forms of deliberate non-compliance.
Dr MA Mazid observed that in the current tax system, low-income earners are paying a larger part of their income as tax than the high-income earners and rich people.  
For example, tax-free income threshold for personal income stays same at Tk 2.5 lakh for the fifth year in a row, while minimum net wealth exemption limit has been increased to Tk 3 crore from Tk 2.25 crore, leaving a number of rich people out of the wealth surcharge net.
Besides, the income tax slabs in the current fiscal year also remain unchanged at 10 per cent for income above Tk 4,00,000, 15 per cent for the next Tk 5,00,000, 20 per cent for the next Tk 6,00,000, 25 per cent for the next Tk 30,00,000, and 30 per cent for anything above Tk 47,50,000.
"The government should widen the limit of taxable income for an individual, as the cost of living has increased manifold due to rising prices of commodities, and inflation," said Dr MA Mazid.
"We hear a lot about "tax fairness," but what is taxed and the level of that taxation follow no logical or moral course. Rather, those decisions are driven by political clout and the perceived need for revenue," Dr Zahid Hussain, Lead Economist, World Bank's Dhaka office told The New Nation.
He also said that the low-earning group would go under further tax-pressure due to a number of fiscal measures introduced in the latest budget.
These are increase of gain tax on savings schemes from 5 percent to 10 per cent, hike of VAT on clothing outlets (both branded and non branded) from 5 percent to 7.5 percent, increase of supplementary duty from 5 percent to 10 percent on the services provided through mobile phone SIM / RIM card and additional 5 percent customs duty on milk powder.
"All these will entail higher costs to consumers particularly low and middle-income families and push up their living expenses," said Dr Zahid Hussain.
He also cited that the government seems to rely more on income tax to sustain incremental revenue target. And this will create more pressure on marginal taxpayers.
When asked, Dr Zahid Hussain said, the policies on indirect taxation (VAT) are archaic and the policies on direct taxation penalise the honest and reward the dishonest.
"Even, paying taxes is more cumbersome than evading taxes," he said.
The revenue target for the fiscal year 2019-20 has been set at Tk 377,810 crore, which is 17.92 percent more than that in the previous fiscal.
In FY 2018-19, the original revenue target was Tk 3,39,280 crore.
Of the revenue earnings in the current FY, the National Board of Revenue (NBR) will collect Tk 325,600 crore, which is around 16.28 percent higher than the revised collection target of Tk 280,000 crore in the fiscal year 2018-19.
The government will spend 20.5 percent of revenue budget on salaries and allowances of its employees.
"The government is persuading an arbitrary nature of tax system, which not only fails to generate significant revenue for the government, but also breeds extremely high levels of corruption and incidents of tax avoidance and evasion," Economist Dr Ahsan Mansur told The New Nation.
He said that the current tax system requires a complete overall to make it fair for taxpayers. A fair tax system can help the government to generate the optimal revenues. Digitalisation of the whole process is the need of the time.
"We are informed that the field level tax officials have been harassing the businessmen in the name of tax collection, which is not fair. Businesses want a harassment-free tax system to comply with their obligations," said former FBCCI President M Shafiul Islam Mohiuddin.    

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