Boosting direct taxes can cut poverty in BD: Study

Business Report :

Bangladesh could reduce poverty and narrow income inequality by increasing revenue from direct taxes while cutting its heavy reliance on indirect taxes, which account for 67 per cent of total annual tax collection, according to a new study.

The study, titled “Taxation to Realise Economic, Social and Cultural Rights in Bangladesh,” was discussed at a city hotel in Dhaka and organised by the OHCHR Mission in Bangladesh.

The study found that if direct and indirect taxes were balanced equally, the overall poverty rate could fall from 18.7 percent to 17.7 percent. The lowest-income households would see poverty decline from 37.2 percent to 33.2 percent, while the next poorest group would see a 3.3 percentage point reduction.

OHCHR consultant Md Salay Mostofa, the study author, said progressive direct taxes would also reduce income inequality, with the income Gini coefficient falling from 0.4999 to 0.490. Consumption inequality would drop modestly from 0.334 to 0.327.

Mr Mostofa noted that Bangladesh’s revenue potential is underutilised due to low tax effort. “Bangladesh ranks only ahead of Congo and Iran globally and remains the lowest in South Asia far below the world average,” he said.

NBR Chairman Md Abdur Rahman Khan said many people, especially in remote areas, must enter the formal tax system. He also highlighted that poorer citizens often bear a disproportionate share of taxes, while large investors enjoy exemptions.

Dr Sayema Haque Bidisha of Dhaka University said taxation should promote economic and social justice, not just revenue collection. She urged expanding the tax net to include high-income earners and businesses, digitisation, and improved digital literacy, while diversifying taxes instead of relying on indirect taxes.

The event was presided over by Dr Zaidi Sattar and attended by former NBR chairman Mohammad Abdul Mazid, BUILD CEO Ferdaus Ara Begum, and Huma Khan of OHCHR Bangladesh.