Friday, May 24, 2024


Dhaka Tribune

Repairing the tax net

Indirect taxes such as VAT are paid by customers of goods and services at the point of purchase

Update : 20 Jan 2024, 10:34 AM

While our taxation system has seen a number of improvements in recent years, it is still plagued by numerous problems -- the most severe of which are the unequal tax brackets, over-reliance on indirect taxes such as VAT -- which ultimately increase the cost of living for poor people -- and loopholes which allow the wealthy to dodge taxes altogether. 
The National Board of Revenue (NBR) has stated that revenue from income tax, customs, and VAT during the July-October period of last year saw a growth of 14.36%, fetching a hefty Tk1,03,976 crore. While this is impressive, this is still TK17,946cr short of the revenue goal that was stipulated as a condition for the International Monetary Fund loan valued at $4.7 billion. 
This will likely lead to the authorities to rely heavily on indirect taxation yet again, a policy that was announced before the start of this fiscal year. Indirect taxes such as VAT are paid by customers of goods and services at the point of purchase. Not only does this take an inordinate financial toll on the underprivileged, to rely mostly on indirect taxes further widens income inequality. This ties in with the overall issue of the current taxation system putting additional burden on the poor while letting the rich off the hook. 
This cannot go on. 
Given our development ambitions, it is natural that Bangladesh would need to collect more tax revenue in the future. But at the same time, the authorities need to reform the current system so that tax-payers are incentivized when they do pay taxes and to increase financial transparency on the part of the government regarding how our tax money is spent. 

Taxes are a net positive for the economy, but it needs to be equitable in a way that everyone pays in accordance with their means and abilities.
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