Tax-Remitting Double Payment (TRD) Cheque and It's Potentiality to Pay Government Taxes

by Prof. Bijon B. Sarma

[Author's Note: A cheque is supposed to make payments to one person or b party. If the owner wishes to pay to two persons, he can easily use two cheques. In that case what 'great' purpose would a Double-Payment Cheque (i.e. a cheque that has arrangement to make simultaneous payment to two parties) serve in this world?

The state leaders of the poor countries keep their heads leaning towards the earth specially when they face those from the wealthy countries or loan giving agencies. The citizens pay taxes such that their government may become strong, wealthy and worthwhile. Due to the cumbersome system of tax payment at times even the patriot citizens feel like avoiding it. Taking this scope, lawyers and officials of the corrupt countries teach the tax payers the techniques of deceiving the government. In addition, many a times the citizens pay government taxes to the parties who are liable to pay those to the government at regular interval. In the developing poor countries, many a times such parties have been found to deceive the government through manipulation.

Tax-Remitting Double payment Cheque (TRD) in association with a simpler system of taxation is capable of eliminating these anomalies at negligible cost. As of now TRD exists only in the imagination of this author. But this author is confident, if given chance it is capable of doing miracles.]

Introduction:

In this article we shall discuss a new type of Bank Cheque, which will be known as "TAX-REMITTING DOUBLE PAYMENT CHEQUE" or TRD Cheque. As of today this cheque is not in use in any Bank anywhere in the world. There is little wonder in it. There was a time when men used to exchange one material for another in barter system. It created tremendous problems when there was the case of payment for services and when the choices of the two parties did not match. At that early morning of civilization, how earnestly men dreamt and imagined of having a common media. Nowadays money plays that role. Similar is the story with bank Cheque for single payment. Because of its obvious advantage, specially in payment of government taxes, Tax-remitting (TRD) Cheque may soon appear in the market.

Why People Use Bank Cheques?

Say one party (a person or organization) needs to pay money to another party. This payment may be done by cash or through bank cheque. Needless to mention that payment by Bank Cheque is easier and hazard-free, specially when the amount is large or the integrity of the recipient is questionable. After knowing the advantages of payment through cheques, let us discuss the common purposes of such payments. There may be numerous purposes. Here we present some broad types only:

(i) Payment by a person or organization to another person or organization for service (e.g. wage),

(ii) Payment by a person or organization to another person or organization as rent for something (say, house rent),

(iii) Payment by a person or organization to another person or organization for commodities or gadgets (i.e. purchase),

(iv) Payment by a person or organization to another person or organization as loan or repayment of loan (e.g. Bank loan etc.).

(v) Payment by a person to another person as loan or repayment of loan (Personal loan).

Categories of Taxes and their Payments:

In any country the expenses of the government is borne by taxes paid by the citizens. The Tax authorities collect taxes in the following three ways :

(01) Fees for license or registration, their renewals etc. : These are collected at prefixed rate directly by the government.

(02) Taxes for (i) Production and distribution of utilities (i.e. electricity, water, gas, telephone etc.), (ii) Production and sale of consumer items, (iii) Income generated due to jobs, services, renting of rentable items etc.

(03) Income generated by trading, business, industrial production etc.

We shall see how the government tax authorities collect taxes for the first two types.

(i) LICENSE, REGISTRATION, RENEWAL FEES : The government fixes rates and ask the applicants to pay the sum in the government's account in the Bank or Post Office.

(ii) TAX FOR UTILITIES : Water, electricity, gas, telephone etc. are provided by the government. Generally the consumers are to pay the bills on monthly basis. This bill includes the cost of the item and / or service and the tax over it. In this case both the bill and tax amount varies from person to person and time to time. In some countries the governments directly collect the money. In some countries the governments employ private organizations for collection. In such case the company collects the bills and pay the taxed amount occasionally or at the end of the year. The government is required to pay them cost for collection or commission. Also there remains possibility misappropriation.

(iii) TAX FOR SALE OF PRODUCTS : Suppose a man produces few tons of agro-products in his farm. Since he has generated some income, the government comes to collect the tax. It is extremely difficult to find out the real income of this man because of wide scope of falsification. In such case the government authorities do the assessment, which also is not free from manipulation.

(iv) TAX FOR INCOME FROM SALARY : The wage earners earn salary from their employers. At present there are rules that persons whose salary exceeds certain limit would have to pay taxes at the source or in advance. Then his final tax is calculated at the end of the financial year and adjusted. The practice is too cumbersome with wide possibility of manipulations.

(v) TAX FOR INCOME FROM SERVICES : Professionals like physicians, engineers, lawyers, teachers etc. at times are engaged either in full time private service or part-time services after their principle jobs. The government collects taxes from these professionals. The system they follow in the developing countries has got wide scope of deception.

(vi) TAX FOR INCOME FROM RENTING OF RENTABLE ITEMS ETC. : Men at times rent their rentable items like house, apartment, vehicles etc. The rate at which they rent varies and at times those depend upon the sale proceeds (e.g. in case of transport vehicles). Even though there is government regulation for paying taxes, in the developing country deviations have turned to be the rule.

(vii) VALUE ADDED TAX : The government has introduced Value Added Tax (VAT) on the sale/purchase of certain items and exceeding certain price level. In this case also there are loopholes in the regulations resulting in deception.

How Efficient the Current Tax Payment Systems are?

We shall present here a brief discussion to see the efficiency of the various Tax payment systems now in use in the developing countries.

(i) License, Registration, Renewal fees : Since the rates of payments are fixed, the payments are received directly by the government and the payment is related with the interest of the payer, the system works fine.

(ii) Tax for utilities : If the taxes are paid directly to the government account, it works well. But anomalies including misappropriation along with deduction for commission take place if the bills are collected by private companies.

(iii) Tax for sale of products : Quite often anomalies take place because (a) the authority in charge of fixing the tax cannot do justice, (b) the owners give wrong information, (c) the market price of the product cannot be correctly assessed, (d) the owner may try influence the taxation authorities etc.

(iv) Tax for income from salary : In the regulations for income tax, some items are excluded from taxation. Taking this scope the income-tax lawyers advise how to pay less through manipulation. Even though government organizations and autonomous bodies calculate taxes correctly, no one is sure about what the private companies do. The present system of payment on certain day of the year makes the tax-payers panicked and compels them to be dependent on lawyers and income-tax personnel. In such cases, the middlemen are benefited and the government is deceived.

(v) Tax for income from services : In this case, quite often the government is deprived of due taxes, because the regulation for such taxation is not full-proof and allows the tax-payers to manipulate or falsify things. The manipulation is extreme in case of private companies.

(vi) Tax for income from renting of rentable items etc. : In this case also, the weak regulation of taxation create wide scope for manipulation.

(vii) Value Added Tax : The purchasers of items are supposed to pay VAT. The sellers in fact keep it from them. Even though some sellers do the job of tax-payment honestly, most others manipulate things.

So, we may see that out of the above seven cases, the tax payment does not work in as many as 6 cases (i.e. Utilities Tax, Product Sales Tax, Person's Income Tax, Service Tax, Tax from rent and Value Added Tax). There are countries where the efficiency of tax-payment has been ensured by trained manpower, sophisticated computers and specially designed softwares. It is obvious that most of the developing countries do not have the ability to afford those.

How the Situation can be Improved:

Without procuring costly computer hardware and software, expensive experts and extensive training programs it is possible for the developing countries to radically improve the tax payment situation by adopting two simple and non-expensive systems. These are:

(a) THE BANKS HAVE TO INTRODUCE (01) "TAX-REMITTING DOUBLE PAYMENT" (TRD) CHEQUE and (02) TAX-REMITTING DOUBLE-PAYMENT (TRD) ACCOUNT.

(b) THE GOVERNMENT HAS TO MAKE THE CURRENT REGULATIONS OF FIXATION AND PAYMENT OF TAXES CONDUCIVE TO PAYMENT BY TRD CHEQUES AND ACCOUNTS

What is: "Tax-Remitting Bank Double Payment (TRD) Cheque":

We all know what bank cheques are. These are "single payment cheques" in which the account holder instructs his bank to make payment to a single person or party. A Double Payment Cheque is the one in which the account holder instructs the bank to make simultaneous payments to two parties. "Tax-remitting Double Payment" or TRD Cheque is the double payment type of cheque in which the account holder instructs the bank to pay certain percent of the payable amount to the Government as Tax and to pay the rest to the party receiving the cheque. In size it may be slightly bigger in order to facilitate writing of the relevant information. Before going into further discussion we present hereunder a sample of the proposed "Tax-remitting Double Payment (TRD) Cheque" :

Fig. No. 01 : TAX-REMITTING BANK CHEQUE
ABCDEFGHIJKL BANK
XYZXYZXY Branch
Cheque No. TR 00000000000

Account No. *(01)¡¦¡¦¡¦0000000000
Date : .
Please debit Total Dollar(in words)
¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦.¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦

and make payments to the following two parties simultaneously : 01) Pay Dollar _ 02) Pay Dollar _ which is *(02) ¡¦¡¦. % of the total amount to Govt. A/C. No. *(03) ¡¦¡¦¡¦.. for ¡¦¡¦¡¦¡¦¡¦¡¦¡¦.. *(04) Tax in favor of the payee with Tax identity *(05) ¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦. which is the remaining amount to A/C no.

• (06) ¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦ of the payee *(07) ¡¦¡¦¡¦¡¦¡¦¡¦.

¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦¡¦.. ¡¦¡¦¡¦¡¦¡¦¡¦¡¦ ¡¦¡¦.

Total DOLLAR

_

Signature

Details of the Legends:

*01 = (Account No.) Here they may write the type of the account like : SB for Savings Bank Account, STD for Current Account, TR (proposed) for Tax Remitting Account etc.

*02 = (Percent to be paid as Tax). This one is a number indicating the percent to be deducted from total payable amount.

*03 = (Account No.) This is the account number of the Government's Tax authority opened with this bank. The Bank will openly display this number.

*04 = (Tax type ) : This is the category or type of tax to be paid, like, Person's Income Tax (may be abbreviated by PT), Value Added Tax (abbreviated by VAT) etc.

*05 = (Tax Payer's Identity Number) : This is the identity number of the Tax payer given by the Tax authorities.

*06 = (Account No. of the payee) : This is the account number of the payee with this bank.

*07 = (Payee's name) : This is the name of the payee to whom the remaining sum is to be paid.

How Taxes may be Paid by TRD Cheques and Accounts:

In order to facilitate payment of government taxes the banks and Government Tax authorities should have to take up the following steps :

(01) The banks would introduce TRD cheques and TRD accounts. Any person having an account (like, STD, SB or TRD) in the bank may ask for either normal (single payment type) or TRD (double payment type) cheques. There will be one limitation of the TRD account. It will be operated only through TRD cheques.

(02) The Govt. Tax authorities would fix the rate of Taxes. Let us say, the following is the date of taxes fixed by the authority. (SAMPLE)

Rate of Taxes (valid from July 01, 2007):

01. UTILITY TAX : Water : From Dollar100.00 to 200.00 : Tax @ 5%
From Dollar 201.00 to 400.00 : Tax @ 7%
From Dollar401.00 to 800.00 : Tax @ 10%
From Dollar801.00 to above
: Tax @ 15%

Electricity : From Dollar 100.00 to 300.00 : Tax @ 4%
From Dollar 301.00 to 600.00 : Tax @ 6%
From Dollar 601.00 to 1000.00 : Tax @ 10%
From Dollar1001.00 to above
: Tax @ 15%

Gas : From Dollar100.00 to 200.00 : Tax @ 5%
From Dollar 201.00 to 400.00 : Tax @ 8%
From Dollar 401.00 to 800.00 : Tax @ 12%
From Dollar 801.00 to
above : Tax @ 20%

02. SALES TAX : Paddy : From Dollar100.00 to above (any amount) : Tax @ 3%
Wheat : From Dollar100.00 to above (any amount) : Tax @ 3%
Jute : From Dollar100.00 to above (any amount) : Tax @ 5%
Rice : From Dollar100.00 to above (any amount) : Tax @ 7%

03. INCOME TAX : From Dollar10,000.00 to Dollar15,000.00 = Rate 10%
From Dollar15,001.00 to Dollar20,000.00 = Rate 12%
From Dollar20,001.00 to Dollar30,000.00
= Rate 15%,
From Dollar30,000.00 to Dollar50,000.00 = Rate 20%
From Dollar50,001.00 to Dollar75,000.00 = Rate 25%
From Dollar75,001.00 to Taka100,000.00 =
Rate 35%,

04. SERVICE TAX : Profession Full time Part-time
(with due permission)
Physician 5% 10%
Lawyer 6% 12%
Teacher 4% 8%

05. HOUSE RENT : From Dollar 1,000.00 to Dollar 5,000.00 = Rate 5%
From Dollar 5,001.00 to Dollar 10,000.00 = Rate 7%
From Dollar 10,001.00 to above = Rate 10%,

06. VALUE ADDED TAX (VAT):
From Dollar 1,000.00 to above (any amount) = Rate 5%

Now we shall see how the tax payers and concerned persons can pay their taxes through TRD Cheques and Accounts.

(01) Utility Tax : Let us say, bills for utilities are collected by a private company. The bill-payer has an account in a bank. He can ask for and collect one TRD cheque book against his account. He would write down the name and account number of the company accepting Utility Tax. Also he would write the total payable amount as written in this bill, percent (%) of tax for this item, Account no. of the govt. tax authority, name and account no. of the private company etc. After payment he would collect a certificate of payment. In this case, the moment the bill-payer has paid the bill the government authorities have got their share of tax.

(02) Sales Tax : The buyers have been instructed to make payment of such deals only in cheque. After negotiation he would deposit the quoted price in TRD cheque in the account of the seller. Then he would take delivery of the product on showing certificate of payment. In this case also, the government tax has been instantly been paid.

In case the seller of products finds accepting cheque problematic (for fear of bouncing back), the tax authority may advice him to open TRD account in which case he can accept cash from the buyer. Details of this system will be presented later.

(03) Income Tax : The person working in an organization has got his salary in a TRD cheque and now he wants to deposit the amount in his account. He has to find out the percent (%) of Tax and account no. of the Income Tax authority and write down those at specified place. He also has to write his name and Income Tax Identity. After transaction he would collect a certified copy of payment.

In this case also, the government tax has been instantly been paid. The man would deposit other salary and taxable cheques. At the end of the financial year he can submit a list of payment along with copies of payments. All of the present cumbersome jobs including the jobs of the account office (who calculate and find out the tax, deposit the same with the taxation department and issue certificates to the incumbents) may be replaced by this simple system.

(04) Service Tax : If the persons who enjoy services from professionals like doctors, lawyers, teachers etc. pay the fees by TRD cheque and the authorities instruct such professionals to accept fees only in TRD cheque, then there cannot happen any case of tax-deception. In case the professionals cannot rely on the cheques of alien visitors, they may ask for certified cheques or accept cash after proving that they have opened TRD account and that al proceeds would be deposited in that account.

(05) House Rent : The government may impose strict restrictions for paying house rent through TRD taxes. As soon as the house or vehicle owner would deposit the cheque in their accounts, the government tax would instantly go to the proper authorities.

(06) Value Added Tax and Rent of transport vehicles : Payment for VAT-payable items and payments like car rent may not be always feasible by Bank cheques, because the shop or car owner may not have confidence in their clients. In this case they may be allowed to accept cash on condition they would open TRD account and all proceeds would be deposited in that account. Here, the buyers have already paid the tax, and it is the noble duty of the shop or vehicle owner to deposit the tax with the government.

Payment of Tax through TRD account : Persons like agro-producer, professional service giver, seller using VAT remittable items etc. who are liable to pay government taxes from their collection and wish to collect cash in place of TRD cheque may be permitted to do so through TRD accounts. In this case they will have to take permission from the taxation authority to open such accounts. The authority would impose conditions that they would have (i) to mention clearly their TRD account number on the Cash Receipt and (ii) would have to submit to the tax authority copies of those receipts along with their bank statement. The safety of the TRD account is, once money is deposited in such account, the account holder can withdraw money only after deduction of government taxes. However, TRD accounts is applicable in case of items with a flat rate of taxation.

Conclusion:

A country cannot be strong unless and until its government is strong. A strong government needs to be self reliant in bearing its own expenses. Lack of money compels the government to become submissive to wealthy countries and loan-giving agencies. Such countries survive only with the pains and humiliation of beggars. No citizen should ever like to see his country in such a state.

Citizen's taxes act as the major source of fund for the government. At present, in the developing countries the citizens pay government taxes. However, at times they become reluctant to do the same because of the cumbersome process of payment. At times the middlemen poke their noses only to harm the government's benefit. At times the persons or organizations deceive the government in paying the taxes already paid to them by the citizen. It is the noble duty of the citizens citizen to see that each and every Dollar they paid as Tax reaches the government treasury.

The modern system to ensure that all taxes paid by the citizens would reach the government treasury is to employ trained personnel, sophisticated computers, intelligently prepared software and a lots of other items. The developing countries cannot afford to do that. But they can easily afford to introduce Tax-Remitting Double Payment Cheque and amicable tax rules to get the same efficiency. As of today such Tax-Remitting Double Payment Cheque exists only in imagination. But in view of its low cost and potentiality, if introduced it may show miracles in the field of tax realization.