Why Tax Justice Matters to Reduce Inequality?

Deputy Director – Programme, Policy and Campaigns

Support people's campaign for ensuring equity and justice

Bangladesh made remarkable progress in the last decade in some of the key social indicators. It is one of the six countries from Asia and Africa that received the UN Millennium Development Goal (MDG) Awards for their significant achievements towards attaining the goal. It’s economy is also growing and per capita income rises to USD 1751 in FY 2017-18. Current GDP now stands at USD 274.11 billion ( BDT 22.50 Lacs Crore). However investment is not up to the mark as required to accelerate the growth. Investment to GDP is 31.23% where public sector contributes only 7.97% and private sector contributes 23.26%. To reach to a middle-income country the scenario need to be changed, it should be increased at least 33% to reach to a double-digit growth over the next five years.

The question is where this additional money will come from. In public sector revenue generation from tax and non-tax sources is the prime concern. But in Bangladesh Tax GDP ratio is only 10.3%, which is lowest in South Asia. Whereas in India and Nepal it is near to 20%. In developed nations it is over 35%. The fact is, we see a declining trend of foreign aid inflow and government is pushing hard to collect revenues from indirect taxes. In FY 2018-19 National Board of Revenue targets to raise BDT 296,201 Crore where proportion of indirect taxes are 66% which includes VAT, supplementary taxes, import duty and excise duty.  This kind of indirect taxes create additional burden on lower and middle-income group on their limited income.  On the other hand, share of direct tax i.e. income tax is one-third of total tax revenue where big corporations and top richest contributes less than 6% of total income tax (which is BDT 16,465 Crore in FY 2017-18). Interestingly the number of ultra-rich individuals in Bangladesh rose by 17.3 percent during 2012-17, (according to the World Ultra Wealth Report 2018) but less than 400 individuals and local and transnational corporations are enlisted as Largest Tax Payers (LTU) at National Board of Revenue. These figures expose a deep rooted culture of tax avoidance and dodging by the top rich individuals and corporations and reveals the inefficiency of our age-old tax collection system. On top of that, we see USD 61.63 billions siphoned from Bangladesh in a decade, between 2005 to 2014, (according to a report of Global Financial Integrity).

The consequence we have experienced is opposite to inclusive economy. Because of the poor fiscal management and regressive taxation policies we observe rise in income inequality in the country. A study by Centre for Policy Dialogue showed that in 2016, the top five percent of Bangladesh's income-earners earned 121 times more than the bottom five percent, which is a jump from 31.5 times in 2010.  This scenario is anti-development and anti-people which undermine the democratic values of the society. We need a massive reform in the taxation policy to correct the situation. To pursue the agenda progressive outlook of the political parties need to be in place. The parties in government and in the oppositions need to vow for adopting a progressive taxation policy along with progressive spending framework for health, education, employment and social protection. Without addressing the recurring economic injustice we cannot transform into an inclusive and developed country.

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