Tax administration

Towards simpler, fairer and better taxes". I'm sorry; I haven't come across this before, as I'm not a regular reader of the magazine. But I haven't also come across the topic in any media that I browse every day. So, I'd like to draw attention of the readers and our beloved economists, think-tanks like Professor Rehman Sobhan, Professor Muzaffar Ahmad, Professor Wahid Uddin Mahmud, Dr. Atiur Rahman, and Dr. Debopriyo Bhattacharya in order to invite extensive debates on the issue on the national media and ultimately force the government to think seriously about implementing it in our country.

Initiated by Estonia in 1994, so far nine countries including Russia have joined the revolution. It's so simple that we only need to decide on a single rate of income tax (both personal and corporate, I suggest it the same rate as VAT) and a threshold of taxable earning. Leave the rest to the individuals to declare all their earnings and to pay the decided percentage to the national exchequer. We don't need any complex schedules of rates, deductions, breaks, allowances, concessions, relieves, expenses, exceptions etc. This would make the tax collection least costly and least corrupt. This would also mean least hassle for the taxpayers. That in turn would encourage more people to pay tax. Carefully chosen two variables - the single rate and the threshold - would make the tax regime somewhat fairer and progressive as the experience in Eastern Europe shows - incentives to avoid taxes (legally or otherwise) make the rich usually pay about as much tax under flat-tax regime as they do under an orthodox system.

I suggest the threshold to be Tk 200,000 and the rate 15%. That would save the lower middle class and encourage the rich to earn more and pay more. I also suggest unlisted companies pay tax on their operating profit and public ltd. companies pay tax only on dividends. That would encourage the companies to list in the stock market on the one hand, and encourage the listed companies to grow bigger by reinvesting on the other .

In the opinion of The Economist - an old idea that for decades elicited the response, "Fine in theory, just not practical in the real world," seems to be working as well in practice as it does on the blackboard.