Emphasising an increase in tax-GDP ratio, speakers at a programme on Saturday urged the revenue authorities to widen direct tax net while reducing pressure on indirect tax collection.
If income tax can be realised from all eligible individual taxpayers, revenue collection can be raised to 3.1 per cent of the GDP from existing 1.0 per cent, they opined.
They made the call and observation while addressing a seminar titled "Using Direct Taxation to Tackle Inequality and Boost Revenue" jointly organised by Research and Policy Integration for Development (RAPID) and Economic Reporters Forum (ERF) at the ERF auditorium in the city's Bijoynagar.
Moderated by RAPID Executive Director Dr M Abu Yusuf, the programme was addressed by National Board of Revenue (NBR) member Mahmudur Rahman, Finance Ministry Additional Secretary Kabirul Ezdani Khan, former NBR Chairman Nasir Uddin Ahmed, ERF president Sharmeen Rinvy, and its general secretary S M Rashidul Islam while RAPID chairman Dr Mohammad Abdur Razzaque presented the keynote paper.
In his presentation, Dr Razzaque said the number of registered taxpayers should be increased as well as all eligible taxpayers should be encouraged to pay income taxes.
Terming the tax-GDP ratio of 9.0 per cent in Bangladesh lowest in the world, he said proportion of direct tax in total revenue is quite discriminatory compared to the rest of the world.
Of the total revenue collected annually, about 65 per cent comes from indirect tax and the rest 35 per cent comes from direct tax like income tax and corporate tax, he said.
However, the government has taken the initiatives to increase the direct tax to 70 per cent while reducing the proportion of indirect taxes to 30 per cent, he noted.
He also said, "If we want to achieve high growth and become a developed country, revenue collection as a proportion of GDP should be increased to at least 17 per cent by 2030 and 21 per cent by 2041."
Referring to low tax net, the RAPID chairman said only 2.4 million individuals submit their tax returns while there are over 7.6 million people in the country with tax identification numbers (TIN).
Besides, he urged the government to increase the tax-free income ceiling for the individual taxpayers because of high inflationary pressure.
Even after this, it will be possible to increase income tax collection to more than 3.0 per cent of the GDP.
Besides, he said another important sector of direct tax is corporate tax that consists of 1.4 per cent of GDP.
Despite there being 273,000 registered companies in the country, only about 11 per cent or 30,000 of them pay corporate tax, Dr Razzaque noted.
Former NBR Chairman Nasir Uddin Ahmed said the target to increase direct tax is quite ambitious so that the government should set a timeframe to achieve the goal.
Initially, the target should remain at 50 per cent instead of 70 per cent, he noted.
He also said due to different types of tax exemption, tax holiday, rebate etc, NBR lost about Tk 2.5 trillion of taxes in last financial year.
Besides, the finance ministry additional secretary agreed with the speakers that the amount of budget is small in proportion to GDP compared to many other countries.
Despite the high revenue potential, the tax to GDP ratio is very low, he acknowledged.
He also pointed out that in many areas like real state and online based businesses like Facebook, Amazon, Foodpanda etc, the government has not realised expected revenue.
However, he said through automation of the tax collection process more taxpayers can be encouraged to pay taxes.
