February 20, 2024
DHAKA – That the vast majority of rich people are not paying income taxes has once again been highlighted by the Bangladesh Economic Association (BEA) which estimates that a staggering 87 percent of the country’s rich and upper middle-class people are evading taxes. Even though one always suspects the number to be high in Bangladesh’s context, especially given its poor tax-GDP ratio, the percentage given by the BEA shows how alarming the situation is.
In April 2023, the Centre for Policy Dialogue (CPD) estimated that Bangladesh is losing potential taxes from as low as Tk 41,800 crore to as high as Tk 223,000 crore because of tax evasion every year. If tax avoidance is also taken into account, the amount rises even further. This is not only denying the government a huge revenue and lowering the country’s tax-GDP ratio—which is the lowest in South Asia and one of the lowest in the world—but also defeating one of the main purposes of taxation: reducing inequality. As such, experts have proposed that the government set up a commission to increase revenue collection and reform the revenue sector, simplify the tax payment system, and focus on collecting more taxes from the rich.
Several think tanks participating in dialogue on the issue gave further suggestions to the government that are worth noting: stopping the opportunity to whiten black money, bringing back laundered money, increasing taxes for unlisted companies, revising tax rates for individual taxpayers, withdrawal of tax on interest on foreign loans, etc. Additionally, according to the BEA, there are 27 sources for increasing the government’s revenue collection, which can massively help us amid the ongoing economic crisis. These include imposition of wealth tax, tax on excess profits, tax on luxury goods, tax collection by abolishing duty-free facility on vehicles for privileged persons including members of parliament, securing proceeds from the recovery of black and laundered money, etc.
The government has, for a long time, failed to increase its tax revenue that, added with the ongoing economic crisis, has eroded its fiscal space. However, it is precisely to tackle this crisis that it urgently needs to implement the various reforms suggested by experts. Otherwise, it will continue to struggle to address the crisis and fund programmes that are essential to stimulate the economy and bring relief to the majority of people.