That Bangladesh has a very prominent tax problem is not a big secret. From an incredibly narrow tax net to policies which only end up hurting those who hover near the poverty line, there is something deeply wrong with our tax culture.
And it seems that the problems are only going to get worse if new provisions under the Income Tax Act 2023 are any indication. The new act has removed the tax exemption status and amnesty on the compulsion to file returns for funds such as provident funds, gratuity funds, and workers' profit participation funds. To add insult to injury, the same does not apply to provident funds which operate under state institutions.
This is an incredibly short-sighted move that is only going to end up hurting private sector companies and their employees while having little to no impact in widening our narrow and seemingly stagnant tax net.
Provident funds are akin to a social safety net for employees in the private sector, and for the government to slap a tax that goes over a quarter of its earnings will only discourage employees from applying for provident funds -- after all, not everyone's income from provident funds is the same, which makes a flat rate of 27.5% all the more baffling.
The key issue that plagues our tax culture is trust, which is to say a lack of it. While taxes are absolutely necessary in ensuring that our economy and development advance unabated, lack of fiscal transparency on the part of the government has led to a gradual erosion of trust in the system on the part of the general public.
Policies like flat-rate taxes on provident funds, which clearly go against the interest of the general public, only make matters that much worse.