Third-party info system to check tax evasion likely

The government is likely to introduce third-party information system from the next financial year to check tax evasion as part of the government aim to mobilise half of the total revenue from income tax by 2020-21.

Officials said that of the introduction of the system is likely to be proposed by finance minister AHM Mustafa Kamal in the proposal of national budget for 2019-20 to be placed in parliament on June 13. 

The finance minister would also propose establishment of a unit in the income tax department to be led by information and communication technology experts as the government wants to enhance the tax to GDP ratio rapidly to meet up the vital criteria of middle income country.
The officials said that the new unit would back the third party information system, a process in which tax officials verify information of individual taxpayers with available data from both public and private parties to find out tax evasion.

Former National Board of Revenue chairman Nasiruddin Ahmed said that the possible third-party information system was already proved to be an effective mechanism to check income tax evasion in many countries.
Under the system, the tax people consider all but taxpayers and themselves as third-party sources of information about tax payers, he said. 

Government departments like land registration, motor vehicle registration authority, banks, foreign currency dealers are vital sources of data that is matched the income tax returns to detect any discrepancy in the income declared and tax paid, he said.

According to revenue board officials, tax evasion is rampant in Bangladesh because of weak tax administration against the back drop of poor record of good governance.

In the outgoing financial year, the revenue board is supposed to collect 1,02,201 crore in revenue from the income and travel taxes that would account for 34.5 per cent of the overall income.

The board has been trying to increase the contribution of income tax and tax to GDP ratio to 15.3 per cent from the existing 11 per cent in 2018-18.
In the FY 2019, the revenue board has been lagging behind target by a big margin as revenue growth in the first eight months of the year was only 7 per cent.

Centre for Policy Dialogue distinguished fellow Debapriya Bhattacharya projected that the revenue shortfall in FY 2019 about Tk 85,000 crore. 
Mustafa Kamal at a number of pre-budget discussions said that tax rate would not be increased in the new budget.

He would rely on widening tax base to increase revenue mobilisation, a must for the country against its record of being one of the nations having the lowest tax to GDP ratio.

According to the revenue board, 16.92 lakh individual taxpayers, including 2.13 lakh new ones, filed income tax returns in 2019 although the number of registered taxpayers was 38.16 lakh.

The finance minister on a number of occasions said that that the number taxpayers should be at least 50 lakh.
At a pre-budget discussion with the Economic Reporters Forum on May 22, he also said that tax offices would be set up at upazilas to expand tax net.
Lamenting that Bangladesh was one of the countries having lowest tax-GDP ratio, he said that expansion of tax base was imperative to keep consistency between economic growth and revenue mobilisation.

The revenue board is conducting a survey in the capital to identify seven lakh new income taxpayers in the outgoing financial year.
NBR member (tax survey and inspection) Md Meftha Uddin Khan said that 2.50 lakh new taxpayers were identified by January and another 4.50 lakh taxpayers would be identified by June.

Bangladesh’s tax to GDP ratio has been hovering around 11 per cent for the past one decade compared to 19.6 per cent both in India and Nepal.
The developed countries maintain 36 per cent in tax-GDP ratio.