[ AUTHOR’S NOTE : Ever since Bank cheques were introduced for transaction, those have been made payable to “one person or party” only, even though there is absolutely no problem in making those payable simultaneously to two persons or parties. If introduced such a cheque may be called ‘Double-Payment Cheque’. The governments of various countries run their businesses by the money they collect from the people as Tax. Collection of tax is a tedious job in which the developed countries invest personnel and costly gadgets. The developing countries who cannot make such investments suffer from the consequences mostly due to non-payment and corruption by those in charge of collection. Double Payment Cheque has got an in-built mechanism by utilising which efficient collection can be ensured with almost no or negligible cases of corruption.
As of today Double Payment Tax is not in existence anywhere in the world. The developed countries do not think of it because they have already invested billions in alternate mechanisms. Probably they are less interested to see it in the developing countries, where they expect to find good demands for their gadgets. In such a context the developing countries with their limited resources can think of introducing it in the interests of the (i) Tax papers and (ii) the government.
It may be seen that its introduction may go against the interests of certain corners who enjoy the benefit of its absence. It is even probable that they may even fight against its introduction. However, introduction of Double Payment Cheque and Account is easy and less costly and involves almost no risk. In this article the basic principles of Double Payment Cheque and Account have been narrated briefly for proper evaluation by the concerned governments and conscious citizens, specially, the tax payers. ]
The people pay taxes on items like personal income, income from their commercial companies, due to sales or purchase, appreciation in price of wealth etc. Also they are exempted from taxes for certain items, below certain level and on certain conditions. Large companies employ experts and tax-lawyers to prepare the extremely cumbersome process of submission of tax return at the end of the financial year. The job of such experts is to lower the payable income as far as possible. Wealthy persons in need of paying taxes also take the help of tax lawyers. The common people with moderate income find it extremely difficult to prepare the papers by themselves. Many a times people try to avert it due to its complicated nature and interference from the corrupt personnel in the taxation department.
When people or organisation take the help of lawyers or personnel of the tax department, there happens no increase in government tax, but a decrease in the same. Such helping personnel in general advise them regarding how to pay less. The developed countries have devised mechanism in which they can ensure better payment, however, at the cost of costly gadgets. The developing countries endeavour to solve the same by substituting the gadgets by personnel. However, reality is, the more is the number of personnel, the more is the loss due to ancillary expenses and corruption.
The job of tax payment can be done quite efficiently in an extremely easy way by using less personnel and no costly gadgets by introducing ‘Double Payment Cheque and Double Payment Account’. When this idea was published in journals and websites many wondered to think “what barred the governments of the developing countries in introducing it”.
In short, Double Payment Cheque is a type of cheque where “the Account holder would instruct the bank to pay the sum simultaneously to two different parties, one of which is the account of the Government.” It can be introduced by the Central Bank only by instructing selecting banks to incorporate Double Payment Cheque (DPC) and Double Payment Account (DPA) within their normal business.
WHAT ARE DPC AND DPA :
DOUBLE PAYMENT CHEQUE (DPC) : Double payment cheque is a type of Bank cheque in which there are written arrangements for payment of the tendered sum to two parties, where one is the account of the government’s tax department. Sharing is to be done on percent basis. Only the banks authorised by the Tax department and having their accounts should be permitted to introduce these. The additional job the banks would have to do is to issue a document showing payment of the taxed amount by the holder or beneficiary of the cheque. Any person or organisation having normal account may ask for this type of cheque in addition to the normal ones.
DOUBLE PAYMENT ACCOUNT (DPA): Double Payment Account is a special type of account that operates like ordinary account with the difference that (i) only double payment cheques are issued from this account and (ii) no Double Payment Cheque is cashed in it, such that there cannot be any duplication. During every withdrawal from such account certain amount (mentioned in percent) goes to the government’s Tax account.
PAYING TAXES WITH DPC :
Men need to pay taxes from sums received from another person or organisation due to a number of reasons like Monthly salary, Bonus, Allowances, House rent, Rent from other rentable items (like vehicles, equipments) etc. In such cases, the employer, person renting house, vehicle or equipment need to pay wage or rent to the employees, house-owners, vehicle or equipment owners etc. respectively. The Tax authorities may fix the rate of tax for various items and declare such transactions mandatory through cheques. Now if they are asked to pay only through Double Payment Cheques, mentioning the percent payable as government tax, then the government may get the tax right at the moment it is generated, and without fail. Also the tax payer can perform his duty without pains. After this, the taxpayer can submit the receipts of paid up taxes to the Tax department, which may be taken to be his ‘Tax return’ or annual statement.
The above may be compared with the present system in which the tax payers need to collect papers from many organisations, fill up a somewhat complicated form, pay money to certain accounts as fixed by the department, all before a fixed date, failing which he needs to pay handsome fine on daily basis. Those who take the help of lawyers in fact pay taxes at reduced rate, even after paying the lawyer. In this case who loses is the government.
PAYING TAXES THROUGH DPA :
Professional’s fee (like, fees payable to physician, lawyer, consultants etc.) and sale proceeds of shops are taxable items. However, the sum paid may vary from quite low to quite high, and also the receiver may not rely on all bank cheques. In such a situation the tax authorities may ask such personnel or organisation to open Double Payment Account (DPA) in selected banks. It has been mentioned that only DPC’s are issued from the DPA’s and no external DPC can be deposited or cashed in such account.
The Tax authorities may fix up rate of tax for various services and sales (like : Physician’s fee, say, 5%, Lawyer’s fee 7%%, Small shops sale proceeds 10%, Departmental store’s sale proceeds 12% etc.). Accordingly the name of the DPA will be, DPA5, DPA7, DPA12 etc., where the numerical number would indicate the percent of tax imposed. The Tax authority shall use their seal and signature in validating the money receipts to be used by the DPA holders. Every time the DPA holders would withdraw money with their DPC, the specified percent of money would be deducted from the tendered amount and be deposited in the Government’s tax account. After every financial year, such account holders would have to deposit their used up receipt books to the Tax department for inspection.
PAYING TAXES THROUGHOUT THE YEAR :
At present the Tax department declares a ‘last date’ for submission of return that creates panic among the tax payers, tremendous pressure of works for the personnel working in the tax office and good opportunities for the tax lawyers. It does not even help the government because most of the taxes are paid at the last moment. It has been mentioned that in DPC government tax is paid right at the moment of transaction. Also in case of DPA, tax is paid right the moment the accountholder withdraws money.
In place of fixing any particular date for payment, the last date of payment for various account holders may be fixed by following a different method. Depending on the first letter of their names they may be divided into 12 groups, where the financial year of each group would end in 12 different months. This would considerably lessen the burden of work of the personnel employed in the tax department.
WHAT THE GOVERNMENT WOULD HAVE TO DO :
The only job the government would have to do for ensuring tax collection in the above mentioned method are : (i) Fixing rate of tax on various items, (ii) Instruct selected banks to open up DPA and introduce DPC. (iii) Instruct the local tax collection officers to open their accounts in those banks and (iv) Issue necessary instructions for the tax papers.
WHAT THE TAX OFFICE WOULD DO :
The local tax office shall prepare a database of the tax payers, specifying their status, type, date of submission of return etc. After the tax payers submit their statements or return, the tax authorities would have to cross cheque those against their bank statements. In case found okay, they would issue a certificate mentioning tax paid in this year and also of cumulative payment.
In case of professionals, shop owners etc. the tax office would have to validate their cash receipt books with seal, Bank account number etc. After they submit their statements along with the used up receipt books, the tax office would cross check and issue tax payment certificate.
WHAT THE LARGE COMPANIES WOULD DO :
Large companies have their own distinctive system of payment of taxes and they can continue the same. However, it may be seen that after the above system is introduced many of their transactions like salary of the staff, sales, purchase, rent etc. have already passed the tax gate. This would make their remaining jobs easier and swifter.
WHAT THE TAX-PAYERS WOULD DO :
A tax payer would fill in the form showing his sources of income (wage, rent, sale proceed, service charge etc.) and submit to the tax office. The tax office would give him a number (the present TIN may easily serve the purpose), fix up his financial year (say, March to April), the last date of payment (it would be minimum 2 months after his financial year (in this case, 30th June) etc. The tax payer would keep record of his tax payments and submit a statement along with evidences (photocopies of receipts). The following job he would have to do is to collect the tax payment certificate after (say) minimum one month.
BOUNCING OF CHEQUES :
In case a cheque is bounced back from the bank, the beneficiary suffers a lot and in some cases finds it difficult to get his money. In case of DPC any bounce back would tend to harass the taxation authority of the government also. So, the taxation authority may keep provision of penalties for such bouncing. If this system is introduced then the confidence of the people on DP Cheque would be consolidated. This reality may help to increase the popularity and demand for such type of cheques and accounts.
FORMAT FOR A DPC :
A format or specimen for the Double Payment Cheque has been shown hereunder.
Date DP Cheque No.
Please debit Total Taka (in words) ………………………………….…………………………… to the following two parties simultaneously :
Account No. ……………………………………………………
In the contemporary age the developed countries have devised many gadgets that help to ease the life and living of the common people. It is natural for the people of the developing countries to use those. As a consequence huge wealth from the developing countries drains out to the rich and developed countries. This is more harmful for countries having no or less natural wealth. The governments of such countries need to depend increasingly upon taxes from the people.
One extremely difficult job faced by the governments of the developing countries is, how to bring more people under tax net. If modern gadgets or greater number of personnel are engaged in such collection, quite often those result in increased ancillary cost and loss due to corruption. In such a situation, a process that ensures tax collection at minimum cost might act as a blessing. “DPC and DPA” is one such solution that can not only increase the rate of collection, but can also redress the pains of the tax papers.
As of today Double Payment Cheque (DPC) and Double Payment Account (DPA) exist only in imagination. But in view of its potentiality, extremely low cost and efficiency, it is capable of doing miracles. The developed countries do not need such mechanism, because they have alternate mechanism. If those costly gadgets are imported, the developing countries may not find considerable increase and it may even go in the opposite direction. DPC and DPA, however, would not betray.
PROF. BIJON B. SARMA,