A small number of wealthy individuals are shouldering the bulk of the income tax burden, while millions of others pay minimal amounts, according to tax administration annual data.
Only 2.8 per cent of individual taxpayers contribute 30.6 per cent of the direct taxes collected from individual taxpayers.
To be specific, some 89,290 individual taxpayers are responsible for one-third of the individual taxes worth Tk 19.63 billion, paying Tk 220,000 per person annually, according to the annual report of the National Board of Revenue (NBR) for fiscal year 2020-21.
Tax officials said most of these taxpayers in the highest tax bracket, 25 per cent, are contractors where tax has been collected at source from their bills or service payments.
Although the number of taxpayers in the middle-income group is highest at 574,429, comprising 18 per cent of total taxpayers, they contribute only 5.5 per cent of the total direct taxes.
In that fiscal year, the number of individual taxpayers was 3.1 million who paid Tk 64.17 billion in income tax. On average, each individual taxpayer pays Tk 20,000 in Bangladesh.
Women and senior taxpayers number 321,323 and pay Tk 10.49 billion. Women taxpayers account for nearly 10 per cent of the total and contribute 16.3 per cent of the total revenue collected from individual taxpayers.
The middle-income group, with annual incomes ranging from Tk 0.4 million to Tk 1.6 million, comprises 11 to 12 per cent of the taxes paid by individual taxpayers.
Some 1,439 retired persons pay income taxes worth Tk 70 million, while 598 injured freedom fighters paid Tk 50 million.
People with annual incomes above Tk 1.6 million have to pay tax at 25 per cent rate.
On the other hand, people with annual incomes of around Tk 30,000 per month are required to pay taxes at the minimum rate.
Contractors top taxpayers
A field-level survey by The Financial Express has found that contractors pay the highest volume of taxes, as it is automatically deducted from their working bills.
Apart from contractors, a senior tax official said salaried persons are among the highest payers of individual taxes in recent times.
With the expanded coverage of withholding taxes, salaried taxpayers cannot conceal their actual income, even though some companies still pay part of their salaries in cash, he added.
"We are heading towards ensuring a total cashless payment of salary. In FY 23, the tax authority has made all types of salary payment through banking channels or mobile financial services mandatory," said the tax official.
It has been found that company directors and sponsors are the next largest taxpayers. Their income primarily comes from non-operating sources such as fixed deposit receipts (FDRs) and capital gains from investments in the capital market or other assets.
A tax official in the Large Taxpayers Unit (LTU) said some 860 individual taxpayers, including sponsor directors, directors of banks and other large companies, pay taxes under the unit.
These individuals also pay higher amounts of taxes, which are deducted at source from their bank deposits, he added.
Tax collection from large individual taxpayers under the LTU was Tk 2.63 billion in FY 2020-21 or 1.10 per cent of the total tax collected by the LTU. This increased to Tk 3.81 billion or 1.60 per cent in FY 22 and Tk 4.03 billion or 1.55 per cent in FY 23.
Currently, about 4.6 million taxpayers submit tax returns to the NBR. Of them, 35,000 are companies and the rest are individual taxpayers.
Skewed burden
Chartered accountant and tax expert Snehashish Barua said tax burden on large taxpayers is higher in Bangladesh as a large chunk still escapes payment.
He said salaried taxpayers have fewer options to evade tax as it is deducted at source. Yet, tax evasion is higher in some professions where payment is made in cash.
Dr Ahsan H Mansur, executive director of the Policy Research Institute (PRI), said it was surprising but not unexpected that contractors were the largest taxpayers, but tax evasion is a common phenomenon.
Developed countries withhold taxes but refund them to taxpayers if too much tax has been paid, he said.
Out main problem with tax collection is person-to-person contact and bribery, added Ahsan H Mansur.
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