Muhith backs taxes at all income levels

It should be compulsory for everyone with an income to pay taxes as it will create a culture of paying taxes and give a sense of pride among all, Finance Minister AMA Muhith said yesterday.

"We should impose a compulsory tax," Muhith proposed at a seminar on payroll tax and tax net expansion, organsied by the National Board of Revenue at Officer's Club in Dhaka.

The tax authority organised the programme after tightening rules to ensure increased tax collection from salaried persons from this fiscal year. It said public and private sector employees, who earn Tk 16,000 or more a month, will have to have TINs to receive their salaries.

Companies will also have to submit a list of employees and their taxpayer identification numbers to the NBR while showing their salary expenses. If employers fail to do so, the salary payment that they have made will be treated as income and will be taxable, according to the changes in the tax law brought for fiscal 2016-17.

Taxmen and analysts at the programme said the enforcement of the rules would allow the government to collect higher amounts of tax from the salaries of public and private sector employees.

Muhith said he had earlier suggested everyone having an income must pay taxes, whatever the amount is: Tk 10, Tk 20 or Tk 50.

"It is to establish a culture of tax payment," he said. But his proposal might not be implemented immediately, he added.

"A climate should be created," he said. "It should be a matter of pride that I am a taxpayer and I have the right. Let there be a kind of public movement in favour of paying taxes."

But such a minimum tax should not be slapped on people who do not earn and are dependants, he added. He suggested the NBR consider imposing such a tax in the next two years.

Muhith also expressed his dissatisfaction over the very poor tax compliance rate.

Some 12 lakh people out of a population of 16 crore submit tax returns regularly, representing less than 1 percent.

Many, including Muhith, believe more people have the ability to pay income taxes.

Muhith also expressed dissatisfaction over the NBR's target to increase the number of tax returns by 3 lakh this year. "I am not very happy. It should be much larger. These are very low targets and these should be raised."

On payroll taxes, Muhith said public sector employees, now 18 lakh, pay tax against their pay.

There are some private sector firms but the ratio of tax payment by people who work in the private sector remains low, although the share of private sector in total employment is much higher than the public sector, he added.

He said more private sector companies have fixed payment structure now than in the past. Firms should deduct tax at the time of salary payment to employees, he added.

At present, NBR gets 3.5 percent of its total withholding income tax collection as advance tax from salaried persons.

The ratio of payroll tax is above 30 percent of total withholding income in advanced economies, said Md Alamgir Hossain, commissioner of Large Taxpayers Unit, in a paper at the seminar.

The number of salaried taxpayers was 4.55 lakh in fiscal 2013-14, he said.

Ahsan H Mansur, executive director of Policy Research Institute, said the tax collection potential from payroll is much higher than the amount the government gets now.

"Salary is the biggest component in national income. It will be big source if we can tap that," he said, suggesting collection of taxes from salaries under an automated system.

Mansur also advised NBR to refrain from increasing the tax-free income limit every year. Almost everyone will come under the tax net in five to six years if the tax-free threshold is kept unchanged, he said.

"Politically, the imposition of minimum tax will be impossible."

Comptroller and Auditor General of Bangladesh Masud Ahmed also spoke at the event chaired by NBR Chairman Md Nojibur Rahman.