Real GDP to be added 3.3pc, if tax-GDP ratio increased to 13.5pc

Staff Reporter :
At least 3.3 per cent of real gross domestic product (GDP) will be added in the country’s economy, if tax-GDP ratio is increased to 13.5 per cent from eight per cent, say experts.
They said that low tax efforts are key barrier to public expenditure in important areas such as education, health, social protection and infrastructural development.
The institutional failure is affecting domestic resource mobilisation negatively over the years, which, in turn, resulted in an increase in the government debts and the country’s current tax-GDP ratio remains far below the optimum level, they added.
“The tax administrative reform can increase the tax-GDP, but the National Board of Revenue (NBR) is unwilling to do this,” Dr Ahsan H Mansur alleged while speaking at a workshop on “Potential Impact of Increased Domestic Resource Mobalisation” organised by Policy Research Institute (PRI) at its office in the capital on Monday.  
He further said the tax-GDP ratio has been decreasing to eight per cent from 11-12 per cent in the past few years due to the absence of tax administrative, which has remained same as it was in colonial era, reform.
“There is no existence of face-to-face communications between taxpayers and tax officials in any country in the world except Bangladesh, which is hampering neutrality of tax officials and the revenue collection is being compromised,” Mansur added. MA Razzaque, Research Director of the PRI said, “NBR’s domestic resource mobilisation failure is affecting negatively over the years and the government spending in some areas, including health, education and social safety net remains poor compared with that in the other developing nations in the world.”
The resource mobilisation is crucial for the country to ensure comfortable fiscal space and microeconomic stability, he said.
As per the United Nations Educational, Scientific and Cultural Organisation standards, public spending on education should be at least four per cent of GDP, whereas Bangladesh’s allocation is only two per cent, he added.
“The government is failing to ensure required allocation in the sectors from which poor people can be benefited due to lack of reform initiatives to increase tax efforts. At the same time, the people, who have gained benefits from the existing tax policy, are not paying taxes properly,” Razzaque said.
“External debts, although still sustainable, is growing fast – from less than $40 billion in FY15 to about $96 billion in FY22,” he added.
Interest payments on domestic debts are currently about as high as 20 per cent of all government revenue and 14 per cent of total public spending, he said.
PRI Director Bazlul Haque Khondker said if the tax revenue could be increased to 13.5 per cent of GDP, the real GDP would increase by 3.3 per cent and the headcount poverty would fall by 2.2 percentage points.
“The changes in tax structure in favour of the direct tax along with expenditures of additional revenue may likely result in additional 3.3 percentage points to the GDP growth rate,” he added.
PRI Chairman Zaidi Sattar said that the existing tax policy was hindering the potential of Bangladesh to become a trading nation.