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The need for tax reform

  • Published at 06:12 pm November 9th, 2017
  • Last updated at 12:49 am November 10th, 2017
The need for tax reform
For a country to function properly, it is crucial for the government to collect revenue in the form of taxes to pay for essential infrastructure, power generation, public health and education, and much more. But in Bangladesh’s case, we not only fall short of our tax collection targets every year, our tax to GDP ratio is also exceptionally low -- both of which underscore the need for reform. Various factors contribute to our ill-functioning tax system. For one thing, the system is rather regressive; the burden of tax falls disproportionately on the poor, because most of our tax revenue comes from indirect or sales taxes like the VAT. Although our income tax rate is theoretically progressive -- the more you earn, the more tax you pay -- it is hardly so in practice. The rich and powerful in Bangladesh are also the most likely to evade taxes. It should therefore be one of the top priorities of the current government to strengthen the tax collection system in the country. We must also expand the income tax base because right now, only 1.6-1.7 million people are paying income tax to support 160 million people -- and this is unfair by any standard. The recent tax fairs in various cities around the nation show ordinary citizens’ willingness to pay taxes. However, income tax offices are notorious for their never-ending red tape, and ordinary citizens, despite their willingness, are usually put off the utterly unhelpful, rude, and venal tax officials; proper training and accountability of tax officers is therefore a must. And finally, if the government can find a way to show tax-payers how their money is being put to good use, it would inspire confidence among the populace and surely improve our tax collections numbers.