The government is likely to offer Tk 2,000 to individual taxpayers next fiscal year to lure them to file returns online, as it looks to accelerate the shift from the manual filing of annual income tax statement, according to finance ministry officials.
Bangladesh aims to become a digital economy by 2021 and over the past decade, it has made strides in many areas. Yet, its advancement in digitisation in the financial sector and tax administration is lagging.
In the case of revenue administration, the majority of customs documents can be processed online, while the businesses can submit VAT returns online. However, taxpayers are yet to deposit VAT to state coffer electronically.
For income tax, one of the successful ventures of the tax department has been the issuance of Taxpayers Identification Numbers (TINs) online.
And in September 2011, the government launched a project with a $25 million loan from the Asian Development Bank to ensure online filing of tax returns, digitise land records management system in selected districts, and improve the access to tax and land information in specialised information and service centres.
As part of the project, the tax administration in November 2016 introduced e-filing.
But the response from taxpayers has been abysmal.
The Manila-based multilateral lender said 44,000 taxpayers submitted online tax returns in 2017, which is about 3 per cent of the total tax returns filed in fiscal 2016-17, showed the NBR data.
But e-filing of returns dropped off in the following years. For instance, the tax authority received just 2,700 returns online in fiscal 2018-19.
This fiscal year, the number of online filers were about 6,000, which is less than 1 per cent of the returns submitted.
The cumbersome process of e-filing of tax returns has been blamed for the dismal response so far. To file returns online, taxpayers have to physically collect user ID and password from the field offices.
But the finance ministry officials are hoping that the rebate might convince individual taxpayers to take the hassle of making that trip to the field office to collect the log-in credentials.
The move to encourage e-filing comes at a time when it is believed that digitalisation of the tax administration offers significant potential for developing countries to increase their revenues.
“Evidence from even the lowest capacity countries (e.g. Liberia) suggests investments in digital capability in tax administration can be a game-changer,” said the Organisation for Economic Cooperation and Development in a report styled ‘Tax and Fiscal Policy in Response to the Coronavirus Crisis’.
Besides, the pandemic, which has left people to stay put at home for weeks on end to flatten the curve on coronavirus, has magnified the need for digitisation of the tax system, as the countrywide general shutdown since March 26 meant many could not file in tax paperwork on time.
Were a digitalised system in place, taxpayers might have been able to do the heed from their homes.