Progressive tax likely to reduce inequality

There was a talk on the progressive taxation on May 23 in the capital. Planning Minister MA Mannan attended the discussion titled ‘Progressive Taxation in Bangladesh: Why and How?’ It is not essential to mention who organized it. The topic is interesting in many ways. It is not the first time ever that the topic came up for discussion. The idea may be new in Bangladesh but not new in other parts of the world.

Economists from all over the globe have long been discussing, debating, talking, writing and carrying out research on the issue of inequality and its remedy. The issue has been given a serious thought as no country in the world can stop growing inequality. With each day passing inequality is growing. Why are the economists concerned about it? They are concerned because when inequality continues to grow wider and wider most of the people lose their purchasing power shrinking the market. And if the markets shrink products produced or manufactured can’t be sold leading to chaos in the market.

This is the reason they have long been giving it a serious thoughts. Their only concern is to limit this growing inequality not to eliminate it. One of the ways economists have found to reduce inequality is to slap progressive tax, a system of tax in which tax rate increases as the taxable amount increases. Put simply, the progressive tax system has tiered tax rates that charge higher-income individuals higher percentage of tax on their income and offer the lowest rates to those with the lowest income.

Many books have already been written on the issue. So far our country is concerned it is almost impossible to impose progressive tax on the rich people. This stark truth came up in the discussion on the issue. It is true and acknowledged across the board, from economists to a layperson, that inequality has deepened over the years in our country. Analysts too at the discussion couldn’t deny the fact. Professor MM Akash, Chairman of the Department of Economics at the Dhaka University rightly pointed out that it would be tough to implement it in Bangladesh as the state was captured by elites.

What he said there is no denying that the state is captured by the elite. In parliament most of the lawmakers who are supposed to deal with making laws are basically businessmen and they are rich. As a result it is not that easy to impose progressive tax on the rich people that constitutes only five per cent of the total population. Planning Minister MA Mannan too can’t deny the fact that inequality is rising, He, however, said the government was trying to uplift the lower-income people.

This ‘try’ and ‘trying to uplift’ are the words used randomly by the people sitting in the highest echelon of the state. Nobody knows how long will it take to uplift those who are marginalized and who pass their days unfed and half-fed? The minister at the same discussion also acknowledged the fact that many businesses don’t pay VAT to the government properly. When this the reality can we expect that progressive tax imposition will bear any fruit in our country?

Sayema Haque Bidisha, a professor of the Department of Economics at the University of Dhaka stressed the need for an effective progressive tax system as it is a crucial tool to reduce inequality and raise more revenues. She also suggested that the tax should be imposed at a higher rate at the upper level. Similarly, the wealth tax rate should be increased. What she said is true but in our country many people are not at all interested to pay taxes as they don’t feel that they will enjoy proper services from the government.

The government can think over the issue of progressive tax system that can help reduce inequality in the society. But it must have to do some background works like why people feel discouraged to pay taxes and how it can compel those rich people to pay more taxes with their income increasing. If the government adopts this policy, we hope, we can at least limit the inequality making the economy a bit more vibrant.