PROGRESSIVE taxation on high-income people can work well to reduce the income inequality that has been deepening in Bangladesh for years. Progressive tax systems have tiered tax rates that charge higher-income individuals higher percentages of tax on their income and offer the lowest rates to those with the lowest incomes.
If the government can impose a progressive tax on high-income people, it will be helpful to reduce inequality. In the parliament, most of the MPs are businessmen and rich. So, imposing a higher tax on the upper one percent of the population is not easy. To do so, a strong political will is necessary so that the big fish are identified and brought under the tax net.
Income inequality in the country has deepened in the past six years as shown in the latest Gini Coefficient data published by the Bangladesh Bureau of Statistics. The Gini Coefficient related to income rose to 0.499 in 2022 from 0.482 in 2016 and 0.458 in 2010. A Gini index of 0 represents perfect equality, while an index of 1 implies perfect inequality.
In order to cut inequality, the government started income transfer in 1996, the first of its kind in Bangladesh, through social safety net programmes. Many people are calling for a cut in the value-added tax rate, but it gives a huge revenue to the government. The National Board of Revenue (NBR) has a good intention to protect the lower-income people and impose more taxes on the higher-income groups, but its goal changes when the government sets a revenue target for it and asks it to achieve it.
Experts urged for an effective progressive tax system to reduce inequality and raise more revenues. The tax should be imposed at a higher rate at the upper level. Similarly, the wealth tax rate should be increased.
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