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Finance Minister Abul Hassan Mahmood Ali on Thursday pointed out increasing the tax-GDP ratio as a challenge for the National Board of Revenue (NBR).
Bangladesh's tax-GDP ratio has been hovering between 7-8 per cent in recent years. According to the OECD, the tax-to-GDP ratio was 10.2 per cent in 2020, below the Asia and Pacific average of 19.1 per cent by 8.9 percentage points, reports UNB.
"There is no alternative to increasing internal revenue to overcome this challenge,” he said in the Budget speech.
While placing the proposed budget for the next fiscal, he said that income tax is the internal driving force of a country's economy and plays an important role in maintaining social and economic equality in the country.
He mentioned that Direct taxes are generally imposed on a progressive basis, with the aim of distributing the burden equitably so that higher-income individuals pay a larger share of their income or wealth as income tax than lower-income individuals.
“Income tax plays an important role in establishing equality and social justice through redistribution of income,” he said.
At present income tax contributes about 35 per cent of the total revenue collected by the National Board of Revenue.
The average growth in income tax collection is more than 16 per cent, he said.
He said that this trend continues to increase in spite of the corona epidemic and slowdowns caused by overseas wars.
“A welfare-oriented and people-friendly income tax reform is an important tool to achieve this objective,” he added.
The finance minister said that the proposed budget provides policy and tax support for building a Smart Bangladesh, preparing for LDC graduation, achieving revenue growth and economic growth, redistributing wealth and reducing inequality, keeping inflation at a bearable level, preserving and promoting domestic industries, earning foreign currency and diversifying exports.
“The current government is pursuing a taxpayer, business and investment-friendly tax policy in tax collection with a view to establishing a strong tax culture in the country.”
The minister said that the essence of this policy is to gradually reduce the tax burden by investing in the economy, increasing the tax-GDP ratio and motivating taxpayers to comply better.
He said that efforts are underway to increase the contribution of direct tax to revenue to 42 per cent by 2031 and 50 per cent by 2041 by enacting taxpayer, business and investment-friendly income tax policies as directed by the Prime Minister to build Smart Bangladesh.
“In continuation of this, digital transformation, tax-net expansion, administrative capacity building activities are ongoing with the aim of increasing revenue collection from internal sources.”
