Tax Evasion in Bangladesh

Arif NoOr

The term Tax refers that it is a contribution exacted by the state. The definition of the tax is
Tax is a non-penal but compulsory and unrequited transfer of resources from private to
public sector, levied on the basis of predetermined criteria. So it is clear that evasion of tax
is a compulsory element of any country and evasion of tax is a punishable crime. But it is
hard to believe that in Bangladesh the tax collected from less than 1% people of the total
population. In this essay the causes of tax evasion and recommendation to tackle this
situation has been discussed with proper elaboration and information.

In Bangladesh why people do not pay the TAX?

There are many arguments, discussions & logics stand behind this mentality of Bangladeshi
people. Certainly it is not possible to discuss every point here. But after the born of
Bangladesh few main causes are there for which people of Bangladesh tries to evade the tax,
the causes are

Weak Tax Administration National Board of Revenue (NBR) is the central

authority for tax administration in Bangladesh & collects almost 80% of total revenue
for the country. Hence it should be considered as one of the strongest administration
of the country though in reality NBR is acting like an injured lion. Corruption &
Power of upper level society does not let it to be the strong administration that it
supposed to be.

Defective taxation system Though the Multiple Taxation system is there but the
Income tax contributes very less in the total GDP. From the income year 2004-05 to
2009-10 percentage of the contribution of Income Tax could not cross 30%.
Government has to rely more and more on other indirect tax income (VAT, Import
duty etc. But the economic structure of Bangladesh is not as much as strong to rely
heavily on the indirect tax source. Moreover it may hamper the business activity.

Weakness in structure In this age of modern technology NBR still runs with their
manual system. Instead of re-checking and re-arranging the system they are
continuing the old system. Change and correction happens in a very little phase. As
for an example, in the head of Agricultural income it is mentioned that if Agriculture
is one & only income of any person then he/she will get TK 50,000 exemption of the
total income. But agriculture cannot be only one source of income now a day. The
person may get involved with insurance; he/she may get interest on the bank deposit.

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Tax Evasion in Bangladesh

Arif NoOr

For few amount of interest amount he/she will not get this advantage. This is not
logical.

g
Greed is always in the personality trait of any human.
Peoples mentality and greed
This also a major problem that stands behind the tendency of tax evasion.

Lack in communicating the advantages of Tax pay It was mentioned before that
greed & corruption exist behind the behavior
behavior of not paying tax. But NBR should
motivate the people about the advantages of taxpaying. Lots of TV commercials are
telecasting everyday as well as government messages. But the most important thing of
the country is Taxation which is not communicating in electronic and printing media.
People always wants direct outcome of their spending. Hence NBR failed to
communicate that paying tax does not have any direct benefit. Each and everyones
contribution financing the government expenditure to ensure the development
development of the
country and providing the facilities.

Cycle of Poverty In Bangladesh the taxable income for a man is TK 1, 65,000 & for
women it is TK 1, 80,000. So if income exceeds these amounts the middle class
people wants to hide the actual income as they think a little tax payment is impossible
for them. By this behavior government are losing revenues, the economic
development hampers,
ampers, as a result income is also remains the same. So people also
continue this behavior.

Uninterested
to pay tax

Less income

Low GDP

Less fnincing
in Govt.
expenditure

Slow growth
of economy

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Tax Evasion in Bangladesh

Arif NoOr

Less emphasize on Income Tax than Value Added Tax From different statistical
survey it was observed that the contribution of VAT is enormously greater than the
income tax. Hence the scenario indicating that government is not giving proper
emphasize on the direct tax collection

Impact of White Money It is an open secret that many well known businessmen are
evading taxes. These untaxed moneys are called Black money, until they get caught
by NBR. Whenever they sued by NBR then for the welfare of the country these
businessmen get a chance to invest that money on government selected business to
make the money white. This type of practice making the system friendly for the tax
evader.

Redesigning the Evasion Punishment Law Its mentioned in the definition of tax
that, evading tax is a punishable offence. Hence government should make the law
strict against this offence.

Recommendations to Tackle this Situation

NBR must give more and more emphasize on the communication of the advantages of
paying tax. It will create a positive impact and people will motivate by themselves to
pay tax.

A well structured revision should be brought out in the tax structure. In our country
we have numbers of renowned economists & consultants. NBR might invite them to
bring on this revision. Or if they need more special design then it will not that much
difficult to hire foreign experts in this age of globalization.

Full phase digitalization in tax administration. It will not only cut down the
complicated paper work but also make the system transparent.

Making the tax criteria flexible to the tax payers, so that they will not treat it as a
complicated work.

In GDP agriculture is contributing the major part. But tax revenue percentage very
little in this sector. Government should find out the possibility to make it as one of the
main tax collection source. Agriculture may consider as in different title.

From last few years regular tax payers are rewarded and socially recognizing by NBR.
This a good practice and NBR should continue this.

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Tax Evasion in Bangladesh

Arif NoOr

It is another open secret that government employees are not that much good in
interpersonal communication. NBR should provide proper training to their employees
and the number of the employees should increase.

However government has to be more assertive to make NBR as one of the strongest
administration of the country.

And, last but not the least we have to motivate our own people. Public concerning
workshop should be carried out.

Conclusion
According to Adam Smith there are 4 canons of taxation which are still effective and treated
as classic. It is also mentioned by Adam Smith that a good tax system must possess these
canons. Real scenario may not match with the bookish knowledge. But one thing is clear, that
whatever we do or whatever we say, at the end of the day we have love for our country. For
this beautiful country we have to be concern about our duty. Apparently we should expect
good facility from the government, we have freedom to enjoy our rights but before go for it
we should know that government expenditure depends on us. This message must be sent to
everyone, whatever medium it needs that should not be the matter.

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