It’s no big secret that our national tax net is incredibly narrow as far too many Bangladeshis view the whole concept of taxation with suspicion, that they are being robbed of their income.
The fact is that taxes are an incredibly important component of any given economy and, given our nation’s medium-to-long term ambitions in terms of growth, widening our tax net should be one of the higher priorities on the government’s list.
While tax revenue collection growing by 15.38% in the first month of the current fiscal year is indeed good news, it points to a deeply worrying trend in our tax collection that the administration needs to shy away from. The increase in tax collection is primarily the result of a hefty rise in value added tax (VAT) collection, and even though it makes sense in the context of the current inflation, our entire tax system relies far too much on indirect sources such as VAT to prop itself up.
Indirect taxes are just another component of any given economy’s overall tax culture, but squarely focusing on indirect taxes not only means a tax net that will be slow to grow, it also places an inordinate burden on the poor. Given just how much our tax net relies on VAT, it is no surprise that the wealth gap in Bangladesh remains as wide as ever.
The key is to restore the lost trust on the part of the public, and the best way to start would be for the government to improve financial transparency so that tax-payers know that their hard-earned money is being spent well.
At this juncture in Bangladesh’s development trajectory, there is a lot that that needs to be done, not just in terms of infrastructure projects that signal progress to the rest of the world, but also fundamental aspects of what it means to be a developed nation, such as clean air and water, a social security scheme that looks after the poor and marginalized, and, of course, universal health care.
