The government of Bangladesh is reportedly losing approximately Tk 84,000 crore, which is about 30 percent of the country's total GDP, due to the informal sector's economy not being included in the tax net. This information was disclosed on Monday in a research report presented by the Center for Policy Dialogue (CPD) at a media briefing titled "Tax Transparency in the Corporate Sector.
Khondaker Golam Moazzem, the research director of CPD, stated that tax evasion in the informal sector amounted to Tk 22,000 crore in 2010, which increased to Tk 84,000 crore in 2021. The size of the informal sector's economy in Bangladesh is 30 percent, and it is growing day by day due to corruption and irregularities.
Golam Moazzem emphasised that if the money evaded by companies could be collected and added to the mainstream of the economy, it is possible to increase the cost of the social safety and welfare sectors by 300 percent. He suggested that tax exemptions should be time-bound and target-based, that all transactions in the financial sector need to be coordinated, and that related reports should be integrated. Digitization and internet-based transactions should be part of this, and organisations need to move towards mandatory sustainable reporting to ensure tax transparency.
CPD's research showed that 68 percent of people do not pay income tax even after earning taxable income. Two-thirds of people do not pay tax even when they are eligible to do so. This is the major reason why the tax-to-GDP ratio has not increased. On the other hand, only 45,000 out of 2,13,000 registered companies have filed returns. Golam Moazzem said that while evading taxes, the company understates its real income, and on the other hand, the benefits provided by the government are accepted under the legal framework.
To ensure tax transparency, the tax rate should be based on fairness. Currently, corporate taxes are being reduced in various countries around the world, but in Bangladesh, they are increasing, resulting in an increase in the amount of black money. Bangladesh has the largest gap between corporate tax and tax GDP ratio among South Asian countries, and this gap is widening due to non-registered transactions and tax leakages.
To get rid of this situation, besides strengthening the tax administration, the financial reports should be made transparent. The tax collection process should be digitized as soon as possible, and corruption in the tax sector should be eliminated, said Golam Moazzem.
As the informal sector's economy in Bangladesh not being included in the tax net is causing significant revenue loss to the government, the CPD demanded the introduction of an integrated financial system. Along with this, the research institute demanded that undisclosed money, or black money, should not be given a chance to be white in the next budget.
TDM/FMT
