With the new budget setting more ambitious income and spending targets, it is important for the government to progress moves to widen the base of taxpayers and to increase revenues.
The future health and development of the economy makes it a key goal for government finances to become self-sufficient.
Although a lot of progress has been made in the past two decades in reducing reliance on foreign aid, the tax base still remains too small to be efficient and fit for purpose.
Less than 2% of the population pays income tax. In part, this is explained by the low levels of typical incomes. The standard annual income tax-free threshold for individuals stands at Tk2.2 lakh, or three and half times the RMG minimum wage.
However, the country also suffers huge amounts of tax avoidance and evasion.
It is clearly not fair to taxpayers, who pay their dues in full, to leave people who can afford to pay outside the system.
While initiatives to improve administration and collection systems by, for instance, facilitating online tax returns, are helping to boost the amount of taxes collected, the government still needs to address the underlying reasons for underpayment of taxes.
Complicated rules which facilitate avoidance or high-import duties, which can often simply encourage avoidance and smuggling, need to be progressively reformed.
Bringing more citizens into the system makes the government more accountable for the delivery of services. It will benefit everyone, including people on lower incomes who still pay indirect sales taxes, by making more money available for public services.
Source: Dhaka Tribune
