Taxation : The other sides

Newspaper reports recently indicated that government is about to launch a major hunt to find out more taxpayers. Theoretically, there can be no objection to this as the total number of taxpayers in Bangladesh are much lower compared to other countries and, therefore, government can expect to increase revenue collection from such a drive. But there should be other considerations also, speciallyin the backdrop of the current rather slowed down pace of new private sector investments in the economy.
A government needs resources to take up various projects and programmes in the social and developmental sectors. The resources in large measures are supposed to be mobilised as taxes given by people and organisations. But as everyone concerned probably knows it in Bangladesh, the taxes collected by the government in different areas are pitiably low compared to the potential. But citizens also have points to raise about government not spending their tax money as efficiently as it should or the hardships it may create on sections of people from the move to extend the net for taxation.
Nonetheless, the fact remains that the base of taxation remains rather narrow and enlargement of it is very important and would be justified to augment tax collection. More significantly, the augmentation requires revamping, modernisation and reforms of the tax administration. No doubt such upgrading and streamlining of the taxation administration have been going on for the last several years and positive results could be seen. But these activities need to be broadened and deepened further within a short time frame to reach early the expected yet higher level in tax collection.
But taking initiatives in taxation cannot be a one way process of only adding to the physical capacities of the National Board of Revenue (NBR).It appears very necessary alsothat people or institutions should be made aware of the need to pay taxes. There are many people and businesses who are able to pay taxes but do not pay or pay in proportion as they feel no guilt associated to non payment or insufficient payment of taxes. Furthermore, the present system has deliberately kept many gaps to facilitate tax evasion. The culture is rather ascendant that tax evasion is the smarter or appropriate thing to do than its opposite. A truly informative and persuasive campaign should precede any move to impose new taxes or purposefully increase the number of new taxpayers. People must be convinced first of the merit of paying taxes and they would also require some assurance that their tax money would be well spent. Only then their motivation to pay taxes can rise.
The efficiency of the taxation machinery depends considerably on retraining the taxmen on modern lines. They can be trained in countries where the tax administrations are efficient. But there should be also recognition that without a substantial follow up revamping of organisations, procedures and methods of administration, much of the training would be wasted. Specially, the tax administration needs to acquire real capacity in the intelligence and enforcement areas.
Besides, there has to be realisation also that stepped up activities to collect more taxes can prove to be successful in a setting where new investment operations are taking place in the economy, the established enterprises are running well or the general health of the economy is a sound one. In such a situation of widespread,diverseandaccelerated economic activities leading to wealth and income creation, taxmen may not have difficulty in finding taxable enterprises or individuals. Individuals and organisation in such a setting are also found more cooperative or willing to pay taxes from their having the resources or abilities to pay more taxes.
But the Bangladesh economy for some years has been suffering from investment stagnation .Notwithstanding massive investments in mainly public sector projects, a corresponding high tide in private sector investments are note noted, How can there be expectation to collect much greater taxes in this scenario ? People can of course be arm twisted into paying more taxes. But that would mean a form of repression. Apart from sending out taxmen to squeeze out more taxes from individuals and institutions , government should alsoadopt policies that would restore the confidence of businesses leading to the invigoration of the real economy. Collecting more taxes then would not prove to be either an oppressive exercise or face lack of cooperation from the potential taxpayers. Till such further invigoration becomes possible, government should aim to fill budget deficits from static or less tax collection through receiving and utilizing greater foreign aid.