The Centre for Policy Dialogue (CPD) on Sunday proposed increasing the tax on high-income individuals from existing 25% to 30% in FY25 as the move would likely reduce income inequality in Bangladesh.
The independent think-tank made the suggestion as the country's Gini coefficient, which is a tool for measuring income inequality within a population, hit a record-high of 0.499 in 2022.
The Gini coefficient is calculated based on the distribution of income or wealth among members of a population, with the index ranging from 0 to 1.
A Gini index of 0 represents perfect equality while 1 implies perfect inequality.
Data from the Bangladesh Bureau of Statistics showed that the country's Gini coefficient stood at 0.482 in 2016, indicating that income inequality has gradually risen over the years.
Against this backdrop, the CPD said the National Board of Revenue (NBR) should revise up the personal income tax rate from 25% to 30%.
The CPD included this proposal while placing its recommendations for the next national budget before the NBR at its headquarters in Dhaka.
The reduction of the highest tax rate goes against the cause of promoting tax justice, the CPD said in a written statement to the NBR.
Muntaseer Kamal, research fellow of the CPD, said they have been raising the issue of rising income inequality for a long time, suggesting more taxes should be collected from high-income groups.
In addition to higher taxation on the rich, the CPD urged the NBR to provide relief to taxpayers in lower income brackets as another means of decreasing income disparity.
At present, the tax-exempt income limit is Tk3.5 lakh. However, people with an income of between Tk3.5 lakh to Tk4.5 lakh have to pay 5% tax.
With inflation now eroding peoples' real income, this slab should be stretched to between Tk3.5 lakh and Tk5.5 lakh to provide a cushion to taxpayers with such limited income, it added.
The CPD also recommended raising the corporate income tax (CIT) for non-listed companies to 30% from the existing 27.5%.
Currently, a 15% CIT is applicable for universities, medical colleges, dental colleges, engineering colleges, and IT training institutes in the private sector.
This rate should be reduced to 10% in FY25, the think-tank said in its statement.
Additionally, the CPD proposed increasing the corporate tax on all companies manufacturing tobacco products from 45% to 50% while also hiking the associated surcharge to 5% in FY25.
Regarding indirect taxes, the CPD recommended that all academic institutions, including English medium schools, be exempt from value-added tax (VAT) on tuition fees for an indefinite period.
