Speakers at a seminar on Saturday said that revenue collection from individual income tax could be increased to 3.1 per cent of GDP from the current level of one per cent if all the eligible individuals pay taxes according to their income tax slabs.
Apart from this, if the tax exemption facility is excluded, it will be possible to increase it to 2 per cent of GDP, they observed at a seminar titled "Using Direct Taxation to Tackling Inequality and Boost Revenue".
The seminar, jointly organised by the Research and Policy Integration for Development (RAPID) and the Economic Reporters Forum (ERF), was held at the ERF office in the Capital's Paltan area.
Speakers also noted that in order to reduce inequality, direct tax measures should be increased and that should be the main way forward. For this, they said the number of registered taxpayers should be increased.
In his keynote, Rapid chairman Dr Mohammad Abdur Razzaque mentioned that Bangladesh's tax-to-GDP ratio is 9 per cent, which is the lowest in the world.
"The main reason for this is the less proportion of direct tax. It should be increased. Currently, there is a 65 per cent indirect tax and a 35 per cent direct tax.
“However, the government has taken the initiative to increase the direct tax to 70 per cent and reduce the indirect taxes to 30 per cent," he added.
Dr Razzaque pointed out that inequality and low government spending (budget) as a share of GDP is the major problem in the country.
"The main reason for this is the low proportion of direct tax. Although the amount of direct tax is increasing in terms of GDP ratio, it is still the lowest compared to other countries of the world," he said.
The revenue income from direct tax of many countries in the world like India, Bhutan and Malaysia is higher than Bangladesh.
The Rapid chairman said, "If we want to achieve the targets of higher growth and becoming a developed country, revenue collection as a proportion of GDP should be increased to 17 per cent by 2030 and 21 per cent by 2041."
He said a significant part of it must come from the direct tax, noting that the tax net is very low, but the tax identification number (TIN) holders are 7.6 million while only 2.4 million out of those submit their returns.
Besides, he suggested that the government should increase the tax-free income of individual taxpayers because of the high inflationary pressure.
Turning to the corporate tax, he cited that the ratio of corporate tax is only 1.4 per cent of GDP. "Currently there are 2.73 lakh registered companies. Of these, only 11 per cent or about 30,000 companies pay tax."
Former Chairman of NBR Dr Nasir Uddin Ahmed said that the new target to increase direct tax is an ambitious target. "The government should give a time frame to achieve the target."
He also suggested that this target should be 50 per cent instead of 70 per cent.
Dr Nasir said the NBR is lagging to increase potential revenue income as many sectors are getting tax holidays and special tax rebates.
Additional Secretary of Finance Ministry Kabirul Ezdani Khan agreed with the speakers that the amount of the country's national budget is small in proportion to GDP compared to other countries. "Despite the high revenue potential, the tax-to-GDP ratio is very low," he added.
He also pointed out that in many areas like real estate and new online platform businesses like Facebook, Amazon, and Foodpanda, the government has lost expected revenue.
Rapid Executive Director Mohammed Abu Yusuf moderated the seminar, while NBR member Mahmudur Rahman, ERF President Sharmeen Rinvy and its General Secretary SM Rashidul Islam were present, among others, at the seminar.
