Bangladesh's tax policy is counterproductive and doesn't encourage investment and productivity, Dr Mashiur Rahman said at a meet Friday, as other economists echoed and all suggested urgent reforms.
"Maybe, we are doing taxation in a way counterproductive in the sense that it doesn't encourage more investment, productivity," said the immediate-past economic adviser to the prime minister.
He made the remarks while chairing a session on 'The Bangladesh Tax Structure: A Middle Income Vision' at the ongoing three-day conference arranged by Bangladesh Institute of Development Studies (BIDS) in a city hotel.
Mr Rahman took exception to the country's tax administration or the tax policy focused on raising more tax revenue without considering how it affects the economic performances.
"Tax on investment isn't understandable at all," he said about this one of the fiscal measure.
The economist and former bureaucrat also pointed out that hassle in tax collection is very significant and an obstacle to increasing the tax-GDP ratio.
Reminiscing his period as NBR Chairman, he said he used to consult businesses and they were ready to pay taxes but sought assurance that there wouldn't be any hassle.
Underscoring the need for reform, referring to an American economist in this case, he said if the problem is administration, then reform should start with administration.
He opines that some taxes significantly hurt investment.
Focusing areas of new scopes of taxes, he said urban land tax could be a promising source of tax.
"Urban land has been appreciated at a significant level, revenue earning from this source missed out somehow," the economist told the meet.
Syed Moinul Ahsan, Professor Emeritus of Economics at Concordia University, Canada, presented the keynote at the session. He said Bangladesh tax-GDP ratio should have been doubled from the existing 8.0 per cent.
Given by the 2022 import data (20.9 per cent of GDP), Bangladesh tax/revenue-GDP should have been 15.5 per cent, about double the actual," he said, adding that Indian data more or less fit in the prediction.
He said that to be a middle-income economy, the country's tax-GDP ratio should be above 15 per cent, failing which spending on basic sectors like education, healthcare stands at the bottom.
"With existing low revenue, the health-sector spending gets about 0.6 per cent of GDP, the lowest among major South-Asian (SA) countries," the economics professor noted.
He said the out-of-pocket (OOP) component as a share of current health expenditure in Bangladesh, at its 74 per cent which is disproportionately high by any comparison.
The World Health Organization (WHO) recommends that countries spend an additional 1.0 per cent of GDP on primary healthcare alone in order to achieve universal health coverage, UHC, as interpreted by the WHO.
He also said middle-income tax structure calls for a much higher dependence on direct taxes, especially on personal income, which is now opposite in Bangladesh.
A fundamental reform by instituting a direct progressive tax on consumption has many advantages. However, the logistics of that reform are dependent on a robust financial system, he said.
BIDS Director-General Binayak Sen said, "We have stagnated at a very low tax-GDP ratio."
He questioned whether the reluctance in addressing issues of taxation is political or something else.
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