About 40pc economy still out of accounts

Mahfuja Mukul: According to the National Board of Revenue (NBR), the size of the country’s economy (GDP) is $454 billion. Beyond this lies the unaccounted economy of 30-40 percent of GDP or $136-180 billion. This sector is growing day by day as many economic activities from small businesses to large scale are conducted illegally. The government does not get any revenue from this as it is out of government accounts. This information was informed by the NBR in a recent meeting with the International Monetary Fund (IMF) delegation.
The size of the government’s budget deficit is increasing every fiscal year due to the failure to raise revenue as expected. In terms of revenue collection as a percentage of GDP, Bangladesh ranks at the very back. Currently, the country’s revenue-GDP ratio is only 7.8 percent, which is the lowest in South Asia. In this situation, the revenue-GDP ratio has been raised to 9.5 percent as a condition for receiving loans from the IMF.
According to the NBR report, the number of registered taxpayers (TIN number holders) in the country is one crore. Among them, less than half filed income tax returns, only 40 lakhs. The ratio of economy to GDP in the country is 30-40 percent which is not accounted for by the government. It is not possible to increase the tax-GDP ratio because this large part of the economy is left out of the calculation.
In this regard, the former secretary of the Ministry of Finance, Mohammad Muslim Chowdhury told, “We have not yet been able to bring the institutional sector fully under the revenue. Although there are 1 crore TIN holders, only 40 lakhs are giving returns. That means 60 lakhs are still out of tax net.
NBR is not able to collect proper dues from registered companies as well as individual tax payers. According to the organization, the number of registered customs holders in the country is 4 lakh 80 thousand. But it is possible to get tax revenue from 4 lakh 50 thousand companies. In this case, at least 30 thousand companies are not paying duty.
Experts say that neighboring countries India and Pakistan also have a larger informal sector than Bangladesh. Still, they are far ahead in revenue collection rate. It is not the case that revenue is falling due to the economy being out of government accounts. Rather, many established businessmen and industrial groups of the country are also evading taxes. That’s why it is not possible to increase the revenue income even though the size of GDP is so big.
The former chairman of NBR Mohammad Abdul Majid said, “NBR has to collect tax from where the income is generated. Failure to do so is a failure. Because people have to pay VAT only when economic activities are conducted. However, if the minimum income is between Tk 3.5 to Tk 4 lakh, they may not have to pay income tax. Taxes are not rising because of the informal sector-this is not a valid argument. If so, how is the size of the country’s economy so large? Then maybe the elders are evading taxes. That is why the revenue income is not increasing.
Criminal economic activity is now one of the biggest contributors to Bangladesh’s economy. Smuggling, dollar exchange rate anomalies, misrepresentation of export goods, money laundering, money laundering and lack of proper accounting of labor force. Along with this, the use of hundi in criminal activities like smuggling of gold and drugs and other goods and human trafficking has now increased on a large scale. Very conservatively calculated, the hundi market in the country has crossed $30-35 billion. Economists and sector stakeholders said that if more in-depth and research-based research is conducted, it will be seen that its market is much bigger than that.
According to estimates, the amount of money transacted through Hundi-Haula in international commodity trade in the country is at least $15 billion. Another $10 billion are coming as remittances. Besides, the contribution of Hundi-Haula to activities like illegal money laundering, smuggling of gold and other goods, human trafficking through corruption and black market is $5-10 billion.
The Government of Bangladesh has prepared a strategy paper titled ‘National Strategy for Preventing Money Laundering and Combating Financing of Terrorism 2019-21’. It mentions 10 countries as destinations for money laundering. These are the United States, the United Kingdom, Canada, Australia, Singapore, Hong Kong, the United Arab Emirates (especially Dubai), Malaysia, the Cayman Islands and the British Virgin Islands. One of the main means of money laundering in these destinations is Hundi. The use of cash has also increased in gold smuggling. Along with this, border-based hundi trade has also grown up. Not only gold smuggling, the use of illegal hundi has increased in many other cases. Observers are blaming the increase in the flow of cash outside the banks behind this. According to Bangladesh Bank statistics, the amount of cash in the country outside the banks has increased by at least 70 percent in a span of 5 years.
One of the sectors of government revenue evasion is the sale of land and flats. In case of sale of land, Mauza value is shown without showing the actual value. Again, in the case of selling flats, the price is shown much lower than the actual price. The Central Intelligence Cell (CIC) of NBR has also reported evidence of tax evasion in the purchase of land, housing or flats. Renowned businessmen, doctors, lawyers, national cricket team players are in this list.
The executive director Fahmida Khatunof the Center for Policy Dialogue (CPD), a private research institute, thinks that it is necessary to increase the monitoring of tax collection. She said, “If we look at those who are not paying tax in the institutional sector, the revenue will increase. Besides, if the tax collection system is reformed, it will be possible to increase the income. Our informal sector is very large. But many taxable traders do not hold TINs or take licenses. In that case, action can be taken against those who evade tax. Again, even if the procedure is simplified through automation, the trust among people will increase and fear will decrease. Then the revenue will increase.
Many economists believe that despite using the institutional structure of the economy, money is being laundered from the country. They claim that customs are being evaded by showing low import-export prices and at the same time low prices of imported products. In this case, NBR is not able to earn revenue as per target. Despite the obligation to pay import duties, the country’s export earnings are not being repatriated on time.
Dr. Shamsul Alam former Minister of State for planning said, “We could not fully bring the institutional sector under tax. About one-fourth of people in this sector do not pay tax. There is a lot of tax evasion here. It is our administrative and capacity issue. No one willingly pays taxes. So, the taxable people should be identified and collected. NBR can demand tax from sweet shops, doctors and teachers if their income is high.