The collection of income tax takes place through various means and modes of law enunciated in the Income Tax Ordinance 1984.
Every year, while presenting budget in parliament for the next fiscal, the finance minister proposes changes in the tax laws and in line with his proposal, amendment to these laws are made through the passage of the Finance Bill.
The process of tax collections are conducted through submission of Income Tax Returns by Taxpayer Identification Number (TIN) holders. There is regular inclusion of new tax-payers every year on a recurring basis. Apart from this, taxes are collected under different modes which are mentioned in section 52, 52A, 52AA and many other sub sections under section 52.
Section 53, 54, 55, and 56 cover deduction at source called Advance Income Tax (AIT) or Tax Deducted at Source (TDS). The rates of AIT and TDS are not rational. The rate of deductions are as high as 10 per cent on collection of revenue of many professionals. Moreover, 15 per cent VAT is also applicable on many such bills. The profit of profession is even not sufficient for 10 per cent TDS. As many import and sales bill involve TDS and AIT, the cumulative tax paid as AIT & TDS ahead of the year-end by these organisation accumulate to enormously large amount which can be around Tk 400 to 500 million.
When these tax-payers submit income tax returns, their shown income cannot in any way absorb the TDS/AIT. Indeed every year, a huge amount remains accumulated due to the problem of adjustment.
The law about refund titled Entitlement of Refund is spelled out in section 146, which states:
- A person, who satisfies the Deputy Commissioner of Taxes or other authority appointed by the Government in this behalf that the amount of tax paid by him or on his behalf, or treated as paid by him or on his behalf, for any year exceeds the amount with which he is properly chargeable under this Ordinance for that year, shall be entitled to a refund of any such excess.
- Where the income of the person is included under any provision of this Ordinance in the total income of any other person, such other person alone shall be entitled to a refund under this chapter in respect of such income.
The ITO-1984 clearly spells about claim of refunds, refunds on the basis of appeal order, form of claim and limitations, interest on delayed refund and adjustment of refund against tax etc. In line with all these, a huge number of refund files are piled up every year to be assessed by the Deputy Commissioners of Taxes ( DCTs).
A huge amount of disallowances of expenses catered with anticipated but enormous amount of increase in sales are projected by the assessing offer. Even when the bank statements and financial statements are furnished, assessments are made on projection. In such cases, the sales figures are doubled or tripled as per the whim of assessing office resulted in the creation of an unthinkable amount of tax-demand.
This kind of assessment leaves huge tax burdens on tax-payers and remains never to be paid off. During the assessment, the refunds created on these files are kept for adjustment afterwards. The process of demands continues unabated while the fate of the refunds is left for appeal with Commissioner of Taxes and Taxes Appellate Tribunals. It is quite a lengthy procedure. Thus the refunds never or seldom see the light of release by the Board of Revenue (NBR) in favour of the tax-payers.
Moreover, such creation of refunds does not take place spontaneously or on time. It requires a huge amount of time and labour from a tax-payer to become successful in getting his refund created, but despite that refunds are seldom made paid to him.
If tax-payers are considered as clients then why should NBR treat them as evaders first? The attitude towards tax-payers needs to be business-friendly. NBR should consider tax-payers as revenue-providers. One should understand that this revenue keeps the government functioning in a sustainable manner. The tax-collectors are not police and have to be very friendly while dealing with tax-payers.
The discretionary powers of assessing officers need to be very rationally exercised to meet the client's demand for a judicious conclusion of tax assessments. Exaggerated assessments made by tax offices at their sweet will should be stopped to minimise sufferings of tax-payers.
NBR should form a separate wing to train its officials to make them more client-friendly so that tax-payers would feel more encouraged to pay taxes.
The writer, a founder partner of Masih Muhith Haque & Co, Chartered Accountants, is a former president
of ICAB.
masih@masihmuhith.com