It appears from what the Finance Minister has been saying that the government aims to achieve a major expansion of the tax base .The reality is the country’s taxation base remains shockingly narrow and surely this state of affairs justify such statements.
Government in a developing country needs to garner increasing amount of revenues and this task can be achieved through fairly and equitably expanding the taxation base by bringing tax evaders and eligible new tax payers under the taxation net. The Finance Minister must be credited for doing considerable work to this end in the last two years. But the same have not been adequate as is apparent from the amounts of taxes actually yielded and contrasting them to the amounts of potential yields. Therefore, one would only expect that the government will truly embark on a major programme in the present and next fiscal years to effectively net in those who are presently fully able to pay taxes but have not been doing so or have been paying taxes disproportionate to their income.
However, it needs to be also considered that taxation is a delicate exercise. While the policy of detecting unethical tax dodgers and finding out new sources of taxation are fully justified, there is also the other side to taxation policies-providing stimuluses to business or economic growth. The latter end calls for the fine tuning of fiscal policies so that the objectives of meeting both the revenue needs of the government and that of providing incentives to businesses for their higher level activities can be accomplished.
It is highly desirable in a country like Bangladesh-with a major part of its population under the poverty line-to employ taxation policies in a manner to safeguard poor people from woes arising from higher rates of indirect taxes on common consumption goods. While every effort should be made to avoid such an outcome, every initiative must be taken to include the resourceful persons as taxpayers and they should be obliged to pay taxes correctly in proportion to their income or wealth. No leniency ought to be shown in this matter.
Lowering of the rate of taxes, tax breaks, etc., can be provided to motivate businesses or entrepreneurs to become more productive and step up their activities. But the present state of affairs where a very few in number pay any income tax at all in a population of over 16 million, is totally unacceptable. The same needs to change with the taxpayers growing in number and the government justifying at every step that it has not taken arbitrary actions but only fair ones in this respect.
Plans should be on the drawing board and their execution needs to be early to modernise the entire tax administration. The same is necessary for the obvious reasons of securing revenue collection on a long lasting basis. But the expected upgradation of the taxation machinery and the contemplated actions to expand the taxation base, are yet not seen though these measures would be vital for the government to maintain the high level of its desired spending in various social and developmental programmes.
Before engaging in any reforms in taxation, it appears very necessary that 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.
Stepped up activities to collect more taxes can prove to be successful in a setting where new investment operations in the economy, the dynamic running of established enterprises or the general health of the economy is a sound one. In such a situation of accelerated 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 adequate resources to do so.
People can of course be arm twisted into paying more taxes. But that would mean a form of repression. Instead of sending out taxmen to aggressively squeeze out more taxes from individuals and institutions, government should rather adopt policies that would restore the confidence of businesses leading to the invigoration of the economy. Collecting more taxes in such circumstances may not prove to be either an oppressive exercise or face lack of cooperation from the potential taxpayers.
