An Assessment of the Achievements and Challenges towards a Balanced Tax System in Bangladesh: A Decade of Direct vs. Indirect Taxes.

Abstract

Despite achieving 7.28% GDP growth in 2016-17, the highest ever in history of country’s economy, Bangladesh has ascertained only 10.8 Tax-GDP ratio which is one of the lowest among the SAARC countries. This poor tax performance has triggered the doubt of not achieving the government’s 7th Five-Year Plan Target Tax-GDP ratio of 14.1 by 2020. The study considered secondary data from 2007- 08 to 2016-17, the most recent decade. It has been found that tax revenue consists of around 87% of the government revenue of which 96.5% is collected by NBR. Having less than 1% of its population under income tax net, the tax structure is dominated by the indirect tax burden, although the direct to indirect tax ratio has been improved significantly from 26%:74% to 37%:63% during the decade, resulting towards a balanced tax structure. The study reveals the government’s efforts to reform the tax administration with a view to tackling the tax evasion and avoidance through enhancing the efficiency of tax administration. The appropriate reform measures will enhance the tax compliance, resulting the significant improvement of Tax-GDP Ratio