Poor people, the key sufferers of corporate tax evasion

Photo: Sariful Islam/ActionAid

Nilupher Begum was going to Chadpur from Dhaka. After living 5 years in the Capital City, she left the city for economic crisis as the price of shelter, food, health and education facility are higher than the village. Everyone comes to Dhaka for better income and livelihood, but Nilupher had to go his native home.

I was also going to same route for a visit in Chadpur. In a discussion, I asked Nilupher, what her dream was and will. She said,

I got married in very early age. I couldn’t go to school because of poverty. Getting good health facility and good life were a dream for me. My entire dream was ruined. Now, I am dreaming of my child, Khaleq, to give him a good life. I want to give him good schooling, better lifestyle and good health facility so that Khaleq will not face problem like me. But, I am scared about my dream. It is almost impossible for me to give such facility to Khaleq event in village.

This is not only the reality of Nilupher and Khaleq, but also the reality of one fourth of the population of Bangladesh, as this portion of people lives under poverty. Nilupher has lost her past and scared about her future in terms of getting basic rights like education, health, shelter and food.

If Khaleq gets good schooling with other basic rights support, dream of Nilupher will certainly be true. But investment in education or health sector can’t make us happy.

According to the Finance Ministry, Govt. has allocated 31,605 Crore TK for Education in the fiscal year of 2015-16 which is 10.70% of total budget and 1.8 percent of GDP. According to World Bank (WB) data, investment in Education of Bangladesh is the lowest in South Asia. WB data also shows, India, Nepal and Bhutan has been allocating more than 4% of Gross Domestic Product (GDP) in Education. In the Global context, countries on good economic advancing level like China, Brazil, South Africa, Chili spend more than 5% of their GDP for Educational purposes. To have better future in terms of getting middle income country with the human resource like Khaleq, budget allocation in Education should be hiked to 6% of GDP. The scenario is the same in the health sector. In 2015-16 fiscal year, Govt. has allocated only 12,695 crore TK which is 0.74 percent of GDP.

Bangladesh has the option to raise the allocation. But the problem is in Financing and Allocation. Bangladesh can’t collect more than 11 percent tax revenue of GDP which should be at least 16 percent. This is because of not having proper tax revenue collection mechanism. Still the revenue mechanism of Bangladesh is driven to give facility to rich people. All the time poor are the sufferer. If we analyze the tax revenue of Bangladesh, it shows that major chunk of the revenue is generated from Value Added Tax (VAT). It indicates that the highest contribution comes from mass people like Nilupher who give VAT by purchasing products. And, these people are vulnerable.

Recent National Board of Revenue (NBR) data shows that the board has collected the highest revenue from the Value Added Tax (VAT) wing with a 32.49 percent growth, followed by customs wing with 26.72 percent and income tax wing with 10.77 percent growth. In this context, govt. is supposed to give more emphasis on collecting revenue from the rich like corporates, but Alas! Govt. has been giving chance to corporate to doss the Tax!

The corporate giants who have come to Bangladesh to do business have been giving tax dosing since 1970. ActionAid estimates in a recent study titled ‘Mistreated’ that the country has 18 treaties which have been giving chance to give tax evasion.  ‘Mistreated’ has estimated that Bangladesh has lost US$85 million in 2013 alone, due to a single rule in the country’s tax treaties.

Just think, if we can collect this money and invest for the children like Khaleq, the dream of Nilupher can be real.

‘Mistreated’ shows that in Bangladesh 23% of the population (37 million people) is at risk of hunger, 49% of the of children in in primary school fail to complete a full five years education, 43.3% people living in poverty. The lost revenue worth US $ 85 million or 680 crore TK per year could pay for health services for 3.4 million people in a year and change at least one scenario as a stepping stone.

This example shows the inequality acuteness in Bangladesh where Corporate Tax evasion is one of ingredients. So govt. should urgently review treaties and make all the treaties in public.

There have also some good examples towards us in this regard. A number of countries have made changes in the corporate tax treaty to increase Tax Revenue collection. Rwanda’s successful renegotiation with Mauritius in 2013 is a strong example of how the country has reestablished its rights. Nigeria, South Africa, Zambia, Malawi and Mongolia are the recent examples of either renegotiating or cancelling tax treaties include. These examples can be the ice braking for Bangladesh to turn around the existing tax deals influenced by restrictive tax treaties.

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