The government must develop a roadmap and action plan of policy measures to achieve the new direct taxation target, which in turn would allow Bangladesh to boost revenue, expenditure, and tackle inequality.
Research and Policy Integration for Development (RAPID) made the recommendations on Wednesday at a policy dialogue titled “Using Direct Taxation to Tackle Inequality and Boost Revenue,” participated by policymakers, experts and private sector stakeholders.
RAPID is conducting research on direct taxation based on the analysis of quantitative data and a series of interviews. Through the data, RAPID is developing a series of short-term, medium and long-term policy recommendations.
Presenting a research paper, at the programme held in the capital’s BRAC Centre Inn, RAPID Chairman Dr Mohammad Abdur Razzaque said, “The move to hike direct tax target from 35 per cent to 70 per cent of the revenue is welcome, but it is also ambitious.
“This target will not be achieved overnight and will take some time. Therefore, it is important to set out a series of step-by-step policy measures that will be necessary to achieve this goal.”
RAPID’s short term recommendations mention the need for a roadmap and action plan of policy measures to achieve the new direct taxation target, implementation of the requirement to submit returns for taxpayers to access public services.
It suggests increasing the tax eligibility floor and the highest rate of personal income tax, deducting calculable tax obligations at source, and automating tax returns. RAPID also recommends automating and centralising the audit system.
RAPID’s medium and long-term recommendations mention the need for increasing the number of taxpayers, rationalising corporate tax rate, and reviewing and rationalising tax exemptions and incentives.
It also suggests dealing with malpractices in tax administration through digitalisation and automation, strengthening the capacity of the National Board of Revenue (NBR), and separate tax policy and tax administration.
To boost tax revenue, attention should be paid to the expenditures to eliminate inequality, so the poor can avail more benefits, speakers say.
Addressing the dialogue, Razzaque said, “Bangladesh has achieved tremendous socio-economic progress. But two issues need special attention – rising inequality and low public spending. An increase in revenue will help boost public expenditures that could help minimise inequality.
“Amid the shrinking fiscal space, the government should put more emphasis on health, education, and social safety sectors. The countries that rely more on direct taxes are more successful. An increase in direct taxes will reduce overall inequality.”
Former chairman of NBR Dr Muhammad Abdul Mazid said, “If the income from taxes does not increase, more difficulties will arise. Increasing the country’s expenditure by borrowing will not bring much benefit.
“If we want to eliminate the inequality present in the country, we must focus on boosting the direct tax.”
Mazid continued, “There is a big target to increase revenue, but no roadmap to implement it. The NBR has to take steps to achieve this goal. For this, the revenue board should be strengthened further.
“The taxpayers or the NBR itself make relevant laws and policies, those would not be able to strengthen the NBR by much. So, policies should be implemented by the NBR, but those should come from a separate body.”
He added, “If tax is not paid, transparency will not be achieved. If we do not bring everyone under direct taxation, we will not get accurate accounts. For this, NBR must be a state agency, rather than a government agency.
“Currently the NBR has to approach the government again and again to boost its capacity. This agency should be allowed to function independently. At the same time, the revenue board should work to increase people’s confidence.”
