Despite the fact that fully-automated electronic tax deducted at source (e-TDS) helps reduce hassles of taxpayers, the National Board of Revenue (NBR) is yet to attract a large number of companies operating businesses and providing services in the country.
As many as three lakh government and private entities across the country are now deducting source tax and paying it to the national exchequer through the manual system.
But a lack of promotional campaign for the digital system and absence of proper training are among the reasons behind the potential users’ reluctance in adopting the method, say sector insiders.
NBR officials said they are working to digitalise the tax deposition system as it is boosting the revenue collection and able to curb tax evasion. Unregistered entities pay source tax manually and most of them fix their withholding tax on their own, they added.
According to them, NBR fails to audit the amount properly due to a shortage of manpower.
The officials estimated that source tax can be increased to 85 per cent from current 67 per cent if the entities register with e-TDS as tax evasion will be easy to be traced through assessment and audit.
They also believe that implementation of the online and automation systems can save cost and time for businesses as well.
Current e-TDS, TDS scenario
At present, there are 7,310 entities, mainly private companies, including banks, non-banking financial institutions and multinational corporations, which are registered with e-TDS system.
Under the system, the government collected Tk 1,421 crore through 39,736 chalans in the just-concluded fiscal year. However, the revenue board set a target to collect Tk 10,000 crore as source tax in the last FY through e-TDS.
NBR officials involved with tax information and management and services said that the e-TDS has been designed to avoid hassles customers face at the tax offices. It also ensures transparency and accountability.
Currently, three lakh public and private entities are paying TDS. Of them, 1.2 lakh are government entities and 1.8 lakh private ones.
The latest statistics showed that NBR collected Tk 1,13,346 crore as income tax in FY23. Source taxes accounted for Tk 77,738 crore or 68.58 per cent of the figure in FY23, and the country depends heavily on this revenue stream.
TDS collection has gone up in the last fiscal year as it was 58 per cent of the total income tax revenue in FY22, officials said.
Taxpayers pay through TDS at source of 53 types of incomes, including sanchay patra and bank account interest of depositors and source tax on export proceeds of exporters.
They have to deposit the money to the state coffers through banking channels and file returns with the field level tax offices, officials say.
The tax officials are trying to make e-TDS popular showcasing its usages, advantages at seminars, webinars and discussions with the business communities and trade bodies to bridge the gap between tax authority and taxpayers.
But the promotional activities need to be geared up further, they said.
The system has been integrated with the government’s automated challan system (A-Challan) that is used for electronic payment of different government fees. There is also a refund facility in the system, tax officials said.
Policy Research Institute (PRI) executive director Ahsan H Mansur said, “The agency does not properly focus on source tax. A large number of companies do not submit returns because they consider source tax as their income tax. Many firms also do not deduct tax on wages.”
He pointed out that the revenue board needs a separate department on source tax, which will collect data and conduct analysis to determine any possibility of tax evasion. “NBR also needs updated IT and management systems.”
The effective tax rate is 47 per cent for goods suppliers and 50 per cent for service providers due the high amount of tax deducted at sources (TDS) and additional source taxes cannot be refunded, insiders say.
However, maximum corporate tax was set at 27.5 per cent in FY23.
