Md. Nojibur Rahman is Senior Secretary, Internal Resources Division (IRD) and Chairman, National Board of Revenue (NBR), Ministry of Finance. Prior to this appointment, he worked as a Secretary of the Ministry of Environment and Forests. He has also served as Secretary, Statistics and Information Division, Ministry of Planning, the Economic Minister (Additional Secretary to the Government) in Bangladesh Permanent Mission, the Director General (Additional Secretary) of the Department of Environment (DOE), Joint Secretary in Local Government Division (LGD), and Deputy Secretary (UN) in ERD and Private Secretary to the Speaker of Bangladesh Parliament.
During an earlier time, Bangladesh was dependent on aid but now we have come to a point where we can take on mega projects with our own funds. In the future, we will need more funds from internal revenue collection sources. How are you moving forward in this regard?
There was once a time when we were heavily dependent on foreign assistance for our development finance but with time this dynamic has drastically changed. We are now financing our mega projects with our own money. This has become possible due to the commendable performance of the National Board of Revenue as our internal revenue mobilization has tremendously increased. Bangladesh has already touched the milestone of becoming a middle-income country. Now we are aiming higher; we want to become a developed nation by 2041. For development purposes, we need finance and in this context, I believe that revenue is the oxygen for our developmental longevity. The NBR is committed to providing the revenue that will be necessary for development and for attaining our goals of becoming a developed country by 2041.
Our tax-GDP ratio is very low compared to other Southeast Asian nations. How can we change this situation?
It is evident that our tax-GDP is ratio is low both in regional and global comparison. However, this scenario is gradually improving. Over this decade, the growth of revenue has been well-exceeding the growth of GDP. As a result, the tax-GDP ratio is increasing year by year. We have achieved and exceeded our revenue target in last two years. This year, the NBR has been given a collection target of Tk 2,03,150 crore, which is about 32% higher than last year’s collection. We are confident that we will achieve our collection target. If we can do that, our tax-GDP ratio will get a quantum leap. In order to achieve our revenue target, we focused on both policy and administrative reforms in this year’s budget. Specific measures have been taken to reduce tax gaps in both regular and withholding taxes. In his budget speech, the Honorable Finance Minister has given special emphasis on the payroll tax. Though payroll tax is a major source of revenue across the world, unfortunately, we collect only 3-5% of our taxes from this source. We are aiming at increasing the share of the payroll tax to 7% by this year, then gradually elevate it to 15% over the next three years.
How have you addressed the challenges posed by your efforts to increase payroll taxes?
Tax evasion is a major issue. In order to deal with this, we have brought significant reforms in withholding tax regulations in this year’s budget. With the successful implementation of our policy reforms, we hope to significantly improve the issue of tax evasion. Apart from the policy changes, four major administrative reforms in direct taxes have been initiated through this year’s budget:
(i) Introduction of eTDS
(ii) Establishment of a centralized withholding tax unit for withholding tax management
(iii) Establishment of an automated tax information system for gathering tax information that will help in taping untaxed sectors and locating unreported taxpayers
(iv) Establishment of an international tax unit for dealing with international tax evasion issues.
We have also undertaken massive reforms in indirect tax areas. The VAT system will go online very soon. With new VAT laws and a fully automated VAT system, the revenue from indirect taxes will be a huge boost. Therefore, we can expect a very healthy tax-GDP ratio in coming years.
How are you working on streamlining tax administration? What is your roadmap for this process?
In the case of streamlining tax administration, transforming tax management is very important. We have introduced modern management and good governance frameworks in tax administration. Specific initiatives have been taken to develop the capacity of tax officials. We have focused on training our officials on both domestic and international levels thus taxpayer services have significantly improved. My colleagues in the NBR are working hard to create a culture of tax compliance in the society.
“The VAT system will go online very soon. With new VAT laws and a fully automated VAT system, the revenue from indirect taxes will be a huge boost”
Our economy is growing but many people are beyond the tax net. What is the situation of taxpayers in Bangladesh?
There is often a misconception that we have only 1.2 million taxpayers. This is incorrect because when counting taxpayers, people often forget about the people who pay tax at the source. Every bank account holder is a taxpayer because he or she pays tax when they receive interest. Every service provider, every importer is a taxpayer. Therefore, about 4 million people pay taxes in our country. So we can say that we have 4 million taxpayers. It is, however, true that we have only 1.2 million return filers of the 2 million registered taxpayers. These figures need to be improved.
How do you plan on bringing these people under the net?
We have undertaken several steps for expanding the tax net. This year’s budget has a special focus on tax net expansion. We have set some quantifiable targets for this financial year which is to increase the number of return filers to 1.5 million and the registered taxpayers to 2.5 million. To achieve the quantifiable goals, we have made return filing mandatory for various taxpayers. For example, any employee of the government or an autonomous body, drawing a basic salary of Tk 16,000 or more, must file a tax return this year. Any private employee, except a worker engaged in production, must have TIN. These measures will certainly expand our tax net. We have also strengthened our tax survey. Field level offices are conducting surveys on a regular basis and bringing in new taxpayers based on those surveys. We are also looking ahead. Tax information is the key to expanding tax net. Following the best global practices, we are going to introduce a fully automated state-of-the-art tax information unit. This unit will automatically gather information about economic transactions from different entities, databases, and systems, and locate potential taxpayers.
You are working very hard to make people tax conscious but still there is the prevalence of the tax avoidance culture. How do you plan on removing this problem?
Tax evasion and avoidance are global problems; even developed countries face these issue. We are organizing revenue dialogues, seminars, partnership discussions and taking many other initiatives to make people compliant. We are following a tax compliance model that has two dimensions which are services and enforcement. We offer services such as consultation, education, motivation, recognition etc. to the compliant individuals. On the other hand, we are tough on those who do not show respect for the law of the land.