TDS Desk:

The National Board of Revenue (NBR) is exploring strategies to expand its tax base while ensuring that these measures do not intimidate or unduly pressure taxpayers.

Currently 67% of the revenue collection comes from indirect taxes like customs duty and Value Added Tax (VAT). The rest of the collection comes from direct tax like income tax.

“We have to increase our focus on this sector [widen tax net],” newly appointed NBR chairman Md Abdur Rahman Khan told his officials during his first meeting after joining office last Sunday.

According to an official document, income tax is an effective system of establishing equality and social justice.

Considering the aftermath of the implementation of the new Income Tax Act 2023, instead of raising tax rates, initiatives are being taken to bring more taxpayers into the tax net by reforming tax policy through rationalising tax rates, particularly expanding higher tax-base, encouraging e-TIN holders to file returns and promoting voluntary compliance.

The NBR chairman also said that a task force will be formed to find out the loopholes of the current income tax law and make it more taxpayer-friendly so that they feel encouraged to pay taxes.

“How much a country is civilised is measured by from where that country’s taxes come. We are far away from that civilisation. We have to be focused on this direct tax so that we can increase the contribution of this sector in the revenue collection. For this, basically, we need competence and intense hard work,” he said.

He admitted that the NBR failed to expand the tax net to a great extent.

He mentioned that NBR could expand the tax net just by inducting new compulsions in the laws and forcing the people to be tax registered through changing laws.

“That is all. We have forced them to be tax registered for taking government services, later we make it mandatory to show income tax return submission,” he said.

According to the available data, out of the total population, only 5.2% is tax-registered, whereas in India, it is 23.08%.

“So we have immense opportunity to widen the tax net,” the NBR chairman hoped.

The official document said that the collaboration between the National Board of Revenue (NBR) and the Bangladesh Road Transport Authority (BRTA) for the exchange of information through system integration for data exchange, data pulling, data storing and data accuracy verification has facilitated new taxpayer identification and collection of arrear by detecting tax delinquencies.

To modernise and automate tax payment, an E-TDS system has been introduced to monitor tax deduction and collection at source and an E-return system has been brought for return filing.

This initiative has made it easier for taxpayers to file their income tax return and the number of new taxpayers is also increasing, the document stated.

At present number of e-TIN registered taxpayers has surpassed 1 crore. Until April of last fiscal year, NBR received 41 lakhs tax returns from taxpayers, mainly individuals, which was 27% higher than that of the same period in fiscal year 2023-24.

The document said that Various policy measures and the requirement of proof of submission of return (PSR) to get different government services have driven the growth of tax returns.

“We have to increase taxpayers awareness, and the resources we have must work effectively. They have to find out why these huge numbers of taxpayers are not being registered,” a senior official of the NBR told that.

He also said that emphasis will be given on the taxpayers’ education.

The NBR chairman had said that the revenue collecting authority would engage the good writers in the tax family to write tax-related materials for the children. If needed, they will make some cartoons and distribute them among the pre-primary and primary school children.

“Even in the high school, we can include this as a part of the social science subject, and for the college level, we can make it as their text,” he told the meeting.

Income tax is the internal driving force of a country’s economy

and plays an important role in maintaining social and economic equality in the country.

Direct taxes are generally imposed on a progressive basis, with the aim of distributing the burden equitably so that higher-income individuals pay a larger share of their income or wealth as income tax than lower-income individuals.

Income tax plays an important role in establishing equality and social justice through the redistribution of income.

At present, income tax contributes about 33% of the total revenue collected by the National Board of Revenue. The average growth in income tax collection is more than 16%.

The document also said that Efforts are underway to increase the contribution of direct tax to revenue to 42% by 2031 and 50% by 2041 by enacting taxpayer, business and investment-friendly income tax policies.