#It is possible to increase personal income tax from 1% to 3.1% of GDP

To reduce the currently growing inequality, direct tax measures should be increased. This will be the main way. In this case, if all eligible individuals pay taxes according to their income tax slabs, revenue collection from Personal income tax would rise to 3.1% of GDP from just around 1% currently.

For this, the number of registered taxpayers should be increased. Apart from this, if the tax exemption facility is excluded, it will be possible to increase it to 2 percent of GDP.

Research and Policy Integration for Development (RAPID) presented the data of these studies in a seminar titled ‘ Using Direct Taxation to Tackling Inequality and Boost Revenue’ on Saturday. The seminar jointly organized by RAPID and Economic Reporters Forum (ERF) the speakers agreed with this information.

Rapid chairman Dr. Mohammad Abdur Razzaque presented the main keynote in the seminar. He said that Bangladesh’s tax GDP ratio is 9 percent, which is the lowest in the world. The main reason is less proportion of direct tax. It should increase. Currently 65 percent indirect and 35 percent direct tax. However, the government has taken the initiatives to increase the direct tax 70 percent and indirect taxes reduce to 30 percent.

He pointed out that, inequality and low government spending (budget) as a share of GDP is the major problems in our country. The main reason this low proportion of direct tax. Although the amount of direct tax is increasing but in terms of GDP ratio it still now lowest than many countries of the world.

Many countries in the world including India, Bhutan, Malaysia’s government revenue income from direct tax is higher than Bangladesh.

Rapid Chairman said, if we want to achieve high growth and developed country, revenue collection as a proportion of GDP should be increased 17 percent by 2030 and 21 per cent by 2041.

And a significant part of it must come from the direct tax. The tax net is very low, as the tax identification number (TIN) holders are 7.6 million while 2.4 million are submit returns. Among this TIN holder paying taxes amount is very low. Beside government should increase the tax free income of individual tax payers because of high inflationary pressure.

Even after this, it will be possible to achieve a personal income tax from everyone as a ratio of more than 3 per cent of GDP. Corporate tax is only 1.4 percent of GDP. Currently there are 2 lakh 73 thousand registered companies. Of these, only 11 percent or about 30,000 companies pay tax. There are many deficiencies in this field as well. And even though many have wealth, only 15 thousand people give search charge tax and it should increase.

Former Chairman of NBR Nasir Uddin Ahmed said, new target to increase direct tax, is an ambitious target. Government should give a time frame to achieve the target. He suggested that, this would be 50 per cent, instead of 70 per cent.

Due to political economy, NBR is lagging behind to increase potential revenue income. Many sectors are getting tax holidays and special tax rebates. Moreover, as many of the members of Parliament are businessmen, they also want to take advantage of the tax exemption.

“Due to these reasons Tk2.5 lak crores of tax has lost by NBR is last financial year.”

Additional Secretary of Finance Ministry Kabirul Ezdani Khan agreed with the speakers that the amount of our budget is small in proportion to GDP compare to many other countries. Despite the high revenue potential, the tax to GDP ratio is very low.

He also pointed out that, in many areas like real state and new business Facebook, Amazon, Foodpanda and many other businesses in online platform government has lost expected revenue.

To increase revenue income he suggested that, “A major solution tax collection procedure should be automated, establish a taxpayer service wing of NBR and policy reform.”

Rapid Executive Director Dr. M Abu Yusuf moderate the seminar and NBR member Mahmudur Rahman, ERF president Sharmeen Rinvy and general secretary S M Rashidul Islam participated in the seminar was present.