Mandatory Returns Submission: FM’s gambit may fall flat for other reasons
Publish- June 19, 2020, 11:02 AM
Update- June 19, 2020, 11:51 AM
Government's move to increase income tax collection by making income tax return submission mandatory for every Taxpayers Identification Number (TIN) holder might not have that significant an impact on revenue collection for the national exchequer.
"There is an inbuilt system in the law that TIN holders will submit their returns, this new proposed system will remain a call, it does not seem that a good number of TIN holders will be responding," former National Board of Revenue (NBR) chairman Muhammad Abdul Mazid told UNB.
A senior NBR official also said that due to understaffing the revenue collection agency may anyway fail to get the whole fruits of this proposed law.
Finance Minister AHM Mustafa Kamal while placing the budget proposal for the 2020-21 fiscal proposed to amend the Income Tax Ordinance to make submission of tax return mandatory for all TIN holders.
"When comes into force, this provision will potentially seal the scope of tax evasion, and significantly increase the number of return filers," he said in his budget speech in Parliament on Thursday last.
The Finance Minister also mentioned that due to the socioeconomic upliftment in the last 12 years for government's various pragmatic steps, many citizens of the country are eligible to pay taxes. Due to gaps in the existing provisions of the law, around 50 percent of the TIN (Taxpayer Identification Number) holders can now easily avoid tax returns submission.
Taking undue advantage of the situation, he said, many eligible taxpayers are now avoiding submission of tax returns and evading payment of taxes.
According to NBR data, only 22 lakh of the 46 lakh TIN-holders submitted tax returns this outgoing year.
A large number of people used to take TINs just to complete their necessary works where its submission is mandatory.
But, a senior official of the National Board of Revenue (NBR) said, after finishing their jobs, these people don’t bother to submit their income tax returns or pay the income tax to the national exchequer.
For example, one person needs to have TIN for purchasing a land or a flat or a car or reduced tax cut on interest of banking rates. For that s/he takes a TIN, but later that person forgets or does not bother to submit the income tax return or pay the income tax, the NBR official said.
According to the Income Tax Ordinance, the punishment for not submitting income tax return is Tk 1,000 for one time and Tk 50 for each delayed day.
The NBR official said that mandatory tax return submission is essential to sort out for what purpose that person availed of the TIN.
"By this we might get some potential taxpayers," he said adding that the number of the taxpayers will not be significant as well as the revenue.
He blamed the capability of the NBR for not ripening up the fruit of the proposed law. In this connection he mentioned that the field level offices of the NBR are not capable of reaching every TIN holder due to the shortage of staff.
"We might not totally utilise the law, but at least the law will give us some power," he said.
He said that due to the law, if enacted, some taxpayers who always abide by the law will submit their tax returns.
He also mentioned that if any taxpayer does not have taxable income for three consecutive fiscal years, it is not mandatory for that person to submit tax returns every year.
Finance Minister AHM Mustafa Kamal in his speech put emphasis on the simplification of the tax return form to ease the process of tax payment and tax return filing for all the taxpayers.
"In addition to the existing return forms, I, therefore, propose to introduce a new one- page-return-form to facilitate return submission by the marginal taxpayers."
But former NBR chairman Muhammad Abdul Mazid said that it is not possible to provide details of a taxpayer in one page return form.
"The number of pages might be increased through including annexure, to specify income tax rate one must have to submit his/her documents properly," he said.
The NBR senior official also put emphasis on changing the system of tax return submission. In this connection he mentioned that India has already changed their system where one taxpayer can submit his/her advance income tax whenever he or she wants with any amount throughout the year and he mentioned the total amount while submitting tax return.
"We have some complexities in our system, we have to go for full automation to avert these," he said.
He also put emphasis on creating a fully automated database for the taxpayers.
The total revenue collection for the proposed budget for 2020-21 fiscal estimated to be Tk 378,000 crore where the NBR will contribute Tk 3,30,000 crore. The revenue from non-NBR sources was estimated at Tk 15,000 crore, while non-tax revenue at Tk. 33,000 crore.
Of the grand amount for the NBR, Tk 103,945 crore will come from income, profit and capital tax, while Tk 125,162 crore will be contributed by VAT, supplementary tax will provide Tk 57,815 crore, Tk 37,807 crore will come from import duty, Tk 55 crore from export duty, Tk 3,686 crore from the excise duty and Tk 1,530 crore as other taxes.