Taxing digital economy can help achieve desired tax-GDP ratio by 2026: CPD
Staff Reporter :
Despite having sound presence in our economy, many non-resident multi-national companies including tech giants do not contribute to revenue generation over the years, the Centre for Policy Dialogue pointed out at a dialogue on Saturday.
CPD, a Bangladeshi think tank, recommended bringing non-resident tech giants such as Facebook, YouTube, Amazon, Netflix, and Google under the tax net.
Discussants at the programme also emphasized taxing and curbing tax evasion of both domestic and non-resident multinationals to further improve the tax-GDP ratio which is now not complying with the level of standard.
The speakers made these observations while taking part in a discussion on “Taxing the Digital Economy: Trade-offs and Opportunities”, on Saturday organized by CPD and sponsored by the European Union at capital’s Bangabandhu Conference Center. The main article was presented by CPD Distinguished Fellow Professor Dr. Mostafizur Rahman.
Highlighting some areas of taxing the digital economy and the scope of increasing revenue desired by 2026, CPD Distinguished Fellow Professor Mustafizur Rahman said, “Legal provisions will need to be put in place for non-resident businesses to get Taxpayer Identification Number (TIN) in order for them to submit tax returns”.
Currently, non-resident digital service providers are not under the tax net of the NBR and hence they are not liable to submit their tax returns in Bangladesh. They do not have any TIN either, Professor Mustafizur Rahman added.
It is necessary to generate additional revenue of Tk 2.34 lakh crore by 2026. As per IMF recommendation, the tax-GDP ratio is to improve by 0.5 percent in FY 2023-24, 2024-25 and 0.7 percent in FY 2025-26, which is two-thirds more than the current fiscal
year’s tax collection target. By contrast, Bangladesh has consistently failed to meet the target of collecting revenue and tax collection.
For evidence the Distinguished Fellow of CPD said that the tax-GDP target set in the 7th five-year plan for FY 2019-20 was 14.1 percent, but the actual ratio was down, and was below half of that.
Addressing the country’s low tax-GDP ratio, former NBR Chairman Dr Mohammad Abdul Mazid, said that the government and the parliament should study first why the tax-GDP ratio is not increasing. After finding the gaps, measures can be taken to resolve them.
Dr Debapriya Bhattacharya, distinguished fellow, CPD, identified five points like ensuring transparency, simplicity in the method, neutrality, fearlessness, and efficient human resources to increase tax revenue collection from tech giants.
Dr. Bhattacharya considered that some of the policy recommendations by the International Monetary Fund’s (IMF) are equal to surrounding country’s sovereignty.
“Through the IMF loan programs, we have surrendered at least some policy sovereignty. We accepted their terms and took the money” he opined.
The noted economist also pointed out that major economic decisions like opting for the International Monetary Fund (IMF) support programme were taken bypassing the key stakeholders including the elected representatives of relevant parliamentary committees.
He also criticized sluggish economic reforms in the country when foreign development partners like the IMF enters the scene.
Dr Debapriya Bhattacharya stressed political engagement in major economic decision making processes, alongside reflecting the view of stakeholders for reforms.
At the programme, Kazi Nabil Ahmed MP, member of the Parliamentary Standing Committee on Ministry of Finance, was present as the chief guest. Dr Fahmida Khatun, Executive director of CPD, moderated the dialogue.
