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Offering tax amnesty sends the wrong signal

Our country’s tax structure is highly dependent on indirect taxes. This ultimately weighs heavily on the ordinary consumer. Particularly at a time when inequality in income, wealth and assets is increasing, this dependence on indirect taxes further widens disparities. What we need is to increase our dependence on direct taxes. Income inequality in the first phase will decrease after the imposition of taxes because people with higher incomes will pay higher taxes. So we had hoped that indirect taxes would decrease and dependence on direct taxes would increase.

For this, we had hoped that this time there would be some initiatives on increasing the powers of NBR, digitalization of NBR and linking expenditure to revenue. The top tax rate has been increased again from 25 percent to 30 percent. This is a positive step. This will ensure that later, when the capital surcharge tax is introduced, even if the rate does not increase, surcharge collections will increase. These are the things we need to focus on.

Bank defaulters or tax evaders receive some amnesty and benefits for whitening black money. So giving them more options to get out of the trouble of not paying taxes on time should not have been a priority. The focus should have been on bringing them back into the tax system, rather than giving them the opportunity to legalize their dirty money by paying a lower tax rate.

One way to increase tax revenue is to increase the tax rate. The other is expanding the tax base. Then there are also people who evade taxes. The NBR chairman himself has said in a presentation that around one crore people should come under the tax slab, while only 35 lakh people filed tax returns last year. So instead of harassing those who already pay taxes properly, taking legal action against tax evaders would warn others to do the same.

The wrong signal is being sent in terms of morality, economics and politics by offering various forms of tax amnesty. It could have been acceptable if tax evaders had to pay a fine of 7 to 10 percent on top of their tax amount. It is not acceptable that all taxpayers have to pay 30 percent, but those who do not pay taxes can hide their money and then pay 15 percent and legalize their money.

As told to Monorom Polok of The Daily Star

Dr. Mustafizur Rahman is a distinguished fellow at the Center for Policy Dialogue (CPD).

The opinions expressed in this article are those of the author.

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