Motivate people to pay taxes

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That only a tiny percentage of people with taxable income pay taxes is an undisputed reality. Bangladesh has the lowest tax to GDP ratio in the South Asian region. A recent survey by the Center for Policy Dialogue (CPD) showed that almost 68% of people with taxable income did not pay taxes to the government.

The number of e-TIN (electronic tax identification number) holders is over 7.4 million as of June 30, 2022. Of these, only 2.3 million had submitted tax returns in the last fiscal year. Again, a significant number of e-TIN holders had submitted tax-free declarations, meaning they paid no tax. The truth is that the latter group needs tax certificates/tax return receipts to manage their business operations or conduct commercial/banking transactions as required by laws and rules.

Government revenue in the form of income tax has increased in recent years, but is not commensurate with the size of the economy and the resulting increase in per capita income. The difference is actually too big.

Tax evasion or tax evasion is more or less a common practice in Bangladesh. But its extent varies. Multinationals are faithful in paying taxes. Local corporations also regularly pay income taxes, but it is not unusual for them to play around with numbers to pay less than the actual taxes payable to the government.

The number of businesses/establishments/owners of residential and commercial buildings evading the payment of taxes across the country will be in the millions. The National Board of Revenue (NBR) has reportedly tried in recent years to place fraudulent companies under the tax net, but without notable success.

Civil servants and employees working in the organized manufacturing and service sectors are among those who regularly pay taxes. The management at the end of each month deducts the amount of tax from their salaries and deposits it in the public treasury. Most others are reluctant to pay taxes.

The NBR must continue to expand its tax net to help generate more revenue for the government. At the same time, it will be important to find out the reasons for people’s reluctance to pay taxes.

In Bangladesh, there are six tax brackets, the highest being 25%. There are countries, mostly developed countries, where the rate is as high as 40% and people pay taxes regularly.

The desire or motivation to pay taxes is very important. But this does not come automatically. Benefits commensurate with paying taxes must exist to motivate people to pay taxes. Old age pensions, free medical care and health insurance are among the benefits that most developed countries guarantee to their citizens. Here, nothing is given as an incentive to taxpayers. The government could say that taxpayers’ money is spent on the construction of roads, hospitals and other structures and on the maintenance of the state apparatus. A regular taxpayer does not enjoy any preference or special treatment when availing the services of these facilities. He is treated like the others. Similarly, a retired taxpayer receives no benefits, financial or otherwise, as a senior. Thus, it will be important for the government to put in place minimum benefits for taxpayers when they become senior citizens.

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