We need to increase our revenue collection
M Golam Charwar: We are approaching the end of the current fiscal year, and another new fiscal year is about to begin. We are facing pressure to increase revenue collection in the upcoming budget.
As per the conditions set by the International Monetary Fund (IMF) for the loan, we need to collect more than 5% additional GDP as revenue in the coming fiscal year, beyond the normal revenue trends.
In the previous fiscal year, the budget projected revenue earnings of 4 trillion 33 billion taka, out of which 3 trillion 70 billion taka was expected to be collected through the National Board of Revenue (NBR) sources, and the rest from other sources. Although there has been some overall revenue growth in the first nine months of budget implementation, it falls significantly short when compared to the revenue collection in the previous year. The situation has reached a point where we need to collect 1 trillion 44 billion 487 crore taka by the end of the year, including the taxes imposed on goods and services.
This task is not going to be easy. After the onset of the dollar crisis, controlling imports became crucial, which required prudent and timely decisions. However, there are also consequences to consider. If imports decrease, import duties decrease, leading to reduced revenue collection.
If imports decrease, the production also decreases, resulting in reduced production-related taxes and VAT collection. As a result, revenue collection decreases. In this situation, increasing revenue collection overnight is not an easy task. So, what should we do? We need to reorganize our revenue collection accounts systematically, increase coverage, and expand the tax base.
In any country, the government needs funds to operate. Economic development requires financial resources, which come from revenue collection. Revenue refers to taxes and other sources of income for the government. The government manages its expenses using the revenue it generates. If the budget cannot be implemented due to a lack of revenue, it can lead to challenges in the development, administration of government functions, and enforcement of laws. To overcome this, the state needs to increase its government revenue.
The government generates revenue through various means to cover its expenses. These include taxation, income from different government institutions, fines and penalties, and the sale of assets. Among these, taxation is a significant component of government revenue. The history of income tax is not ancient in the Indian subcontinent.
After the uprising of the Indian Rebellion of 1857, the British faced severe financial crises, which led them to consider increasing revenue.
In the modern world, income tax is a significant component of government revenue. However, the situation of income tax in our country is disappointing. A large portion of the population falls outside the tax net. There are allegations of tax evasion against the major taxpayers, while the middle class, who pay taxes, are subject to higher scrutiny.
In a country with a population of around seven hundred million, there are only eight million individuals with Tax Identification Numbers (TIN). Among them, only 2.9 million people pay income tax.
According to economists, for a country to have a sound economy, around 30% of total revenue should come from direct taxes, with the remaining 70% from indirect taxes. Here, we have an inverse picture. Therefore, we need to increase our direct tax collection. However, the focus should be on increasing the number of taxpayers rather than just the tax amount. By increasing the taxpayer base, tax revenue will also increase.
Where is the problem in translating English? Why are people afraid to come into the tax net? Fear was never an issue before. Those who have income and are eligible to pay taxes will pay them for that year. They will not pay for the year they are not eligible. So why are people afraid to come into the tax network? Because people think that once they enter the tax net, they will have to face consequences. Even when they have no income, they will gradually be harassed. To save themselves from that harassment, they have to give incentives to tax officials.
The allegation of corruption against government officials has existed in almost all countries and all ages. In the 16th century, poet Mukunda Ram described it in his poem: "The government became a thief, it eats the land without benefit." Here, the government means the tax collector.
He writes off the uncultivated land as barren land that does not yield any income. Yet, he consumes bribes without providing any benefits. The meaning is that even in the 16th century, there was corruption. We will find such scenes even before that. Does all this evidence give them a license to take bribes? No. So what should be done?
Corruption must be stopped. Deception must be prevented. Only then will people pay taxes willingly. If we want to keep the country where we live well, we must give a portion of our income to the government so that the government can carry out daily tasks, enforce the law, and promote development. When people understand these, when taxpayers are respected, and when a tax-friendly environment is created, people will pay taxes. But what is happening here? Let's hear from the NBR.
In 2019, the VAT division of the NBR conducted a satisfaction survey among taxpayers. The survey revealed that 22% of large institutions had to give bribes when submitting VAT returns. If large institutions have to resort to bribery for protection, what about small individuals? We know that those who give bribes are the ones who suffer, and they also give bribes to avoid harassment. The most effective way to eliminate corruption from any system is automation. Every sector, including customs houses and tax stations, needs to be automated to eliminate corruption.
"Do only corrupt officials indulge in bribery and helplessness? What is the situation of the donors? I said, if you encourage people, they will do it. But do all the people of a country, a nation, or a civilization understand law, tradition, and responsibility equally? Do they practice it? Then there would be no problems in the world.
Let's see the situation of the donors themselves. A decade ago, in the fiscal year 2013-14, the income from fish farming was only 3 percent. At that time, many candidates in the tenth national parliamentary elections campaigned as fish farmers in their affidavits. It is known that many of them did not have any investment in fish farming.
Even now, many people sell those products in the open market without using them for production without paying any taxes, and without value addition. Then there is the matter of tax evasion. In any country, government policy helps an industry to stand. Once it stands, it has to come under the umbrella of taxation. In our country, many developed sectors are still enjoying the benefits of tax evasion. We need to keep these in mind.
It is not good in the long run to implement the budget with loans. Therefore, we need to increase our revenue collection. We have a larger budget coming up. More dreams are coming. To pursue that dream, we need to build responsible citizens who will contribute to the country's income and take responsibility honestly. Only then, as a nation, we will reach the ranks of the developed world.
Author: Researcher and Columnist.