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Beggars are best taxpayers

Edit Date:8/18/2010 12:00:00 AM

by Shakhawat Hossain Khairuzzaman Chowdhury,

the country’s first tax ombudsman, tells New Age BEGGARS in Bangladesh are the best taxpayers because they have no way to evade tax, says the country’s first tax ombudsman, Khairuzzaman Chowdhury. ‘They pay whenever they buy anything because they have no way to evade tax like customs duty and value-added tax,’ he said in an interview with New Age.

On the other hand, he said, big taxpayers frequently dodge tax. ‘More than 60 per cent of the big taxpayers conceal their income and expenditure.’ Khairuzzaman was made the tax ombudsman in July 2006 after serving as chairman of the National Board of Revenue for three years. His tenure ended in July, with the policymakers of the Awami League-led government, including the finance minister, having announced that the office of the tax ombudsman would be closed down. He deems the decision ‘unfortunate’ and suspects that it might be politically motivated.

‘The Bangladesh Nationalist Party-led alliance government shut down the Tax Settlement Commission, which had been established by former Shah AMS Kibria,’ he said. ‘It may have been one of the motivating factors,’ he added. ‘As a nation, we have a tendency to dismantle something built by someone and then try to rebuild it. Such a practice is a complete waste of time and resources.’ Khairuzzaman believes an all-pervasive absence of good governance is a major obstacle to bringing a higher number of people under tax coverage. Excerpts: As the chairman of the National Board of Revenue, you had to bring tax dodgers to book while as the tax ombudsman, you had to prevent taxmen from creating any hassles for taxpayers.

Which was more challenging? I enjoyed both assignments. As the NBR chairman, my responsibility was to maximise tax collection and thus I had to be on a constant lookout for tax evaders. However, as the tax ombudsman, I was entrusted with investigation of complaints of maladministration and harassment lodged by taxpayers against tax officials. I found out that tax officials do harass taxpayers, especially small taxpayers, for minor lapses. They would not have done so had the taxpayers been generally sincere about disclosing their income and expenditure. On both the assignments, as the NBR chairman and as the tax ombudsman, I tried my best to help people and save them from unnecessary hassles. You were widely acclaimed for smashing down luxury vehicles brought through false declarations by a dishonest importer.

You also had to turn down many requests to stay firm on your decisions. As the tax ombudsman, how did you evaluate the decision of the NBR chairman? Smashing the vehicles to scrap was the most notorious act in my long career in civil service. However, I had to do it. I had to carry out the order of the Supreme Court on the one hand and deter others from engaging in such malpractices on the other. Surprisingly, it was appreciated by people at large and attracted huge media coverage as well. The revenue board brackets income taxpayers into three categories — big, medium and small. Which among these groups is frequently involved in tax evasion? Big taxpayers, without any doubt. The proportion of tax evasion by big taxpayers is huge. More than 60 per cent of the big taxpayers conceal their income and expenditure. A lot of focus is being given on the NBR nowadays. During my tenure, the NBR unearthed tax evasion by a number of big shots and persuaded them into paying what was due. Who are the best taxpayers? The baggers. They pay whenever they buy anything because they have no way to evade tax like customs duty and VAT [value-added tax]. Many taxpayers in our country raise the issue of good governance in defence of their unwillingness to pay tax. Do you think the absence of good governance is a major obstacle? Of course, it is a big obstacle. Absence of good governance is everywhere in the country. What is good governance? It is simply doing what one is assigned to do and not interfere with others’ responsibilities. We often fault others without looking at our own lapses. When the taxpayers raise the issue of good governance, they should first ensure that they discharge their own responsibilities properly. Good governance would only be established when an enabling environment is created for, and support given to, the public officials to carry out their responsibilities.

The NBR has over the years received policy support from the International Monetary Fund, with a view to increasing revenue generation. Are the IMF suggestions viable? I would not say that the NBR takes policy support from the IMF and the World Bank. The IMF and the World Bank give suggestions about ways and means to enhance revenue generation. The NBR only takes the suitable ones. The NBR established the Central Intelligence Cell and Large Taxpayers Units in 2004-05. Both the units returned handsome dividends for the NBR. The growth of the income tax and VAT departments has also been quite satisfactory in recent years. What about the IMF suggestions to separate tax policy matters from the NBR execution issues? The suggestion is good. But I don’t support the idea of the Finance Division taking over the NBR policy department.

For better coordination, it is the Internal Resources Division that should take over. What are the common harassments that the taxpayers face? What are your recommendations to remove these? Most of the harassments are linked with incomplete tax returns and insufficient disclosure of income and expenditure. As a result, tax officials get the opportunity to estimate income and expenditure at their will as the tax law has given them such discretion. Taxpayers should submit complete information on their income and expenditure. They need to be more conscious about the income tax related rules and regulations. Here comes the role of the tax advisers.

Those who engage competent and sincere advisers face little or no hassle. The administrative function of the income tax officials should be segregated on functional basis so that the officer assessing the tax return is not responsible for collection of tax and other enforcement matters. The disposal of the tax-related issues by the court should be faster. Besides, the function of the tax ombudsman’s office should continue to help both taxpayers and tax officials in overcoming maladministration, unnecessary hassles and harassments. Former finance minister Saifur Rahman told parliament in 2005 that if actions had been taken against corrupt tax officials the entire revenue division would have become empty. Have you seen any improvement among tax officials after that observation? It was an extreme comment. The reality is not so bad. No doubt, a large number of them are not so scrupulous but the attitude and activities of the tax advisers need also be taken into consideration. The office of the tax ombudsman was set up to curb corruption by tax officials.

 

How successful has it been? The office of the tax ombudsman office was not there to curb corruption; that is the Anti-Corruption Commission’s job. The tax ombudsman’s office was successful in identifying the cause of maladministration and irregularities but unfortunately this nascent institution is not given sufficient time to make its impact felt. Say something about tax officials who showed non-cooperation with the tax ombudsman’s office. Most tax officials became conscious after the tax ombudsman started its function. But there are some senior officials who did not want to implement the ombudsman’s recommendations citing lack of provision in the tax laws.

I have to admit that it would be better if such provisions were included in relevant laws empowering officers responsible for implementation of ombudsman’s recommendations. Such recommendations were sent to the government but to no avail. The government could incorporate such provisions to strengthen the tax ombudsman. What is your evaluation about the government’s decision to close down the office of the tax ombudsman? Many believe the decision was political as the past political government led by the Bangladesh Nationalist Party established the office to address the grievances of the taxpayers. It would be very unfortunate if the government eventually closes down the office without proper evaluation and without an alternative. The latest statement by the finance minister to close down the office might be politically motivated. The Bangladesh Nationalist Party-led alliance government shut down the Tax Settlement Commission, which had been established by former Shah AMS Kibria. It may have been one of the motivating factors. As a nation, we have a tendency to dismantle something built by someone and then try to rebuild it. Such a practice is a complete waste of time and resources. Will you be surprised if the present government appoints a new tax ombudsman in near future? I will be the happiest if the government appoints a new tax ombudsman. I am still hopeful about continuation of such an institution.

 

http://www.newagebd.com/2010/aug/19/oped.html#1

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