THE evasion of Tk 2,262.36 billion in taxes in 2023, as a study by the Centre for Policy Dialogue finds, calls the tax administration into question. What is further worrying is that the government lost half the amount, or Tk 1131.18 billion, because of corporate tax evasion that year. The Centre for Policy Dialogue in the study, Corporate Income Tax Reform for Graduating Bangladesh: the Justice Perspective, made public jointly with Christian Aid Bangladesh in Dhaka on April 21, notes that tax evasion registered a noticeable increase in 2011, having reached Tk 1,336.73 billion in 2015, more than doubling from Tk 65.03 billion in 2012. The Centre for Policy Dialogue has identified several factors that have contributed to persistent tax evasion. They include high tax rates, weak enforcement, a complex legal framework and widespread corruption within the tax administration system. The report on the study says that from a tax justice perspective, high tax evasion discourages honest taxpayers and increases the burden on the people who go by the law.
The Centre for Policy Dialogue research director says that it is not only tax evasion but also incentives and tax breaks that eat away a huge amount of revenue. The director says that incentives or tax exemptions cannot be a basis of investment. The incentive structure fully relies on political considerations and Bangladesh should be purged of such a structure. The organisation has, in such a situation, urged the government to reform the tax structure and set corporate income tax not lower than 15 per cent in keeping with the global maximum tax commitment under the OECD/G20 Inclusive Framework, yet maintaining Bangladesh鈥檚 competitive advantage. The organisation has also urged an increase in the corporate income tax rate for the export-oriented apparel sector to 15 per cent. The apparel sector now enjoys a 12 per cent corporate tax on general factories and a 10 per cent tax on green factories. It is important to attend to the issues that hold back revenue collection because Bangladesh鈥檚 graduation out of least developed countries would bring some challenges. The investment of multinational companies would increase after the graduation, but the risk of tax evasion and tax avoidance would also increase. The government, therefore, needs, as the Centre for Policy Dialogue says, to increase institutional capacity, develop a digital infrastructure for tax system and implement policy reforms.
The government is in need of reforms in tax and value-added tax sector as it provides for 60 per cent of the revenue. The government should rather move away from indirect taxes and focus more on direct taxes.
