If Bangladesh significantly boosts interoperability among departments through complete digitalisation, adoption of global standard practices, and digital solutions in the taxation system, the country will moblise tax revenue to $167 billion in FY30, from the existing $48 billion.
In a keynote presentation based on a Centre for Policy Dialogue (CPD) study, CPD Distinguished Fellow Mustafizur Rahman made the remarks in a dialogue titled “Digitalisation of the Taxation System in Bangladesh: The Next Frontier” at a city hotel on Sunday.
Research data indicates that $119 billion could be increased within seven fiscal years by addressing factors with untapped potential, reducing human interaction, and enhancing administrative services through digitalisation.
Presenting this data, Mustafizur states, “Through sustained digitalisation of the taxation system, Bangladesh could gradually enhance revenue GDP ratio to 16 per cent by FY30, up from the existing 7.8 per cent tax to GDP ratio.
“If we cannot adopt fully digitalisation and automation, then it will be dangerous for us in the coming days. Our overall dependency will go up as the annual programme has already been financed by domestic and external borrowing. We cannot finance it on our own.”
He added that even now the country is now repaying debt by borrowing from other sources.
Bangladesh’s foreign debt reached over $100 billion until December 2023, according to the central bank.
Mustafizur pointed out, “If we attain the domestic revenue target for 2020, set the goal at 16 per cent of GDP in the 7th Five-Year Plan, we will not be dependent on external borrowing anymore. We currently cannot even reach that goal.
“Which is now operating at tax, VAT and customs wings under the National Board of Revenue (NBR) is non-integrated, and digitalisation is not progressing as much as the country’s economy is progressing. If we cannot ensure an integrated interoperability among them and adopt digitalisation, leakage will not be reduced.”
Only ensuring 25 per cent of all taxes being filed online can increase revenue an additional $7.8 billion in the fourth year, Mustafizur added.
“There are different types of income which are not legit,” CPD’s Distinguished Fellow Debapriya Bhattacharya said, adding, “Those who do not pay taxes and launder money are financially and politically very powerful.
“Curbing that is a matter of political goodwill. Tax officials hold arbitrary power. Therefore, potential taxpayers fear harassment and corruption. Digitalisation here can play a pivotal role to curb concerns, create transparency, ensure simplification, and enhance services.
NBR chairman Abu Hena Md Rahmatul Muneem said, “The board is helpless as the finance ministry sets its revenue target in the budget without considering its capability.
“The target is even set by comparing the previous year’s target, not considering the actual collection of NBR. Therefore, we cannot take innovative strategies which can simplify the existing taxation system and bring fruits in the future.”
Muneem added that people will also have to figure out, along with the government, to raise awareness for reducing foreign dependency, and make the country a developed one.
Currently, the country has 1.35 crore eligible taxpayers, but only 41.45 lakh individuals submitted their income tax returns.
“We are working to bring them under the tax net and working to provide a cash incentive for consumers against EFD issued invoice so that consumers are interested to take invoices. This can curb leakage in the retail VAT sector,” Muneem pointed out.
Attending as the chief guest, State Minister for Finance Waseqa Ayesha Khan said, “We will have to remember that the goal set for the NBR should be smart and timely, so that it could be attained.
“Even, we are just talking about increasing tax revenue but the NBR will have to ensure services for the taxpayers and award them so that they will be more interested in paying taxes.”
