The Advisory Committee formed to propose positive reforms in the National Board of Revenue (NBR) has said that the existing tax policy is not recognised by the stakeholders as a good system in terms of international best practices, for investment in the country and to support sufficient revenue growth apart from establishing economic and social justice.
The five member committee made the observation in its interim report which has been submitted to the government.
It is worth noting that a good tax system means low rates, low exemptions, broad base, low trade and consumption taxes, progressive income tax, free from duplication, value and account-based taxes, etc, the report said.
“Significant deviations are observed in the tax system of Bangladesh in these criteria,” it added.
On October 9 last year, the interim government through a gazette notification formed the five-member committee comprising two former NBR chairmen and three former NBR members.
The ex-chairmen are- Muhammad Abdul Mazid and Dr Nasiruddin Ahmed while three former members are— M Delowar Hossain, Farid Uddin and Aminur Rahman.
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As per the gazette, the advisory committee will advise on fiscal policy reforms, revenue administration reforms, assess the institutional capacity of the National Board of Revenue and provide recommendations for modernisation, advise on formulation of institutional frameworks and policies for integrity and good governance, advise on citizen communication and stakeholder engagement activities and any other policy advice related to revenue reforms.
In its interim report, the Committee mentioned that the two functions related to tax revenue policy and revenue administration, which are recognised as very important for the stability and sustainable development of the macro economy, are being carried out simultaneously by the same board.
As a result, the expected response and success in increasing revenue collection as per the needs of the government and providing services as per the expectations of the public are not being met, it said.
The report also said that since the work of formulating tax policy and its implementation is entrusted to the same institution, various complaints and irregularities such as compromise, corruption and conflict of interest are coming to the fore in the formulation of the said policy and its implementation and control at various levels.
The Committee mentioned that the two functions have to be done simultaneously, the policy makers and senior management authorities have to spend more time on policy formulation than on revenue policy management and revenue collection.
"Therefore, they cannot take adequate measures to collect the expected revenue and increase institutional capacity for that purpose,” the report said.
Although the two functions are embedded in the same organization, the jurisdiction of both, especially policy formulation, has not been specified, and in many cases, legitimate issues are neglected and overlapping is taking place.
“There are also allegations that arbitrary power is being misused at times.”
It is pertinent to note that in 2008, an order was issued by the then caretaker government to separate revenue administration and policy formulation activities, but it could not be implemented.
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In 2009, the next government did not cancel or suspend that decision but withdrew from implementing that decision.
The Advisory Committee felt the need to review and take into consideration the experience of implementing the previous order while formulating the current proposal and making implementation recommendations.
The National Board of Revenue was established by Presidential Order No. 76 of 1972 (National Board of Revenue Order of 1972).
Since its establishment, the National Board of Revenue has been carrying out two interrelated/related activities in revenue collection by simultaneously formulating revenue policy and implementing the formulated policy.
Since tax revenue is of utmost importance for the overall development of the state and the said Board is carrying out the two activities considered to be interrelated/related simultaneously, the possibility and apprehension of various limitations, distortions and weaknesses in tax revenue collection have been continuously strong and evident.