Tax evasion costing dearly

Bangladesh is losing potential taxes from as low as Tk 41,800 crore to as high as Tk 223,000 crore every year because of tax evasion committed by individuals and corporations. Centre for Policy Dialogue (CPD) said overall potential tax losses would be between Tk 55,800 crore and Tk 292,500 crore annually and this needs to be cut so that the country can meet its expenditures aimed at economic development and public welfare.
The amount of tax evasion is estimated to be eight times the social safety net and welfare expenditures. Tax exemption is happening in multiple ways such as showing lower incomes, unethical support from tax practitioners, claiming more investment allowances, individuals reporting lower incomes, and higher informal or cash-based transactions. The revelation of tax losses comes at a time when Bangladesh’s fiscal space has been facing persisting strain for lower revenue generation against elevated expenses.
Bangladesh has one of the lowest tax-to-gross domestic product (GDP) ratios in South Asia, prompting economists and multilateral lenders to suggest increasing revenue collection to enhance the country’s capacity to bankroll expenditures. Bangladesh’s current tax-to-GDP ratio stands at 7.9 per cent, way behind the ideal benchmark of 15 per cent. So, the country needs to collect additional tax revenue of Tk 145,000 crore to lift the ratio to 12 per cent and an additional Tk 250,600 crore to raise it to 15 per cent. The number of taxpayers who file income tax returns regularly is very low in a country of around 17 crore people.
The size of the informal economy is one of the key reasons for tax losses for the economy. The size of the informal economy was 30.2 per cent of GDP in 2021. To overcome the challenges, corruption needs to be addressed and the government needs to work intensively to widen the tax net.