Poor domestic resource mobilisation increases external debts: PRI

Highlights

• Bangladesh's tax-GDP ratio has decreased to 8% from 11-12% in the last few years due mainly to lack of policy reforms: Ahsan H Mansur 
• The existing tax policy is hindering the potential of Bangladesh to become a trading nation: Zaidi Sattar 
• If tax revenue could be increased to 13.5% of GDP, real GDP would rise 3.3%: Bazlul Haque Khondker 

Lack of good governance, negligence in automation and institutional failure of the National Board of Revenue have been badly impacting domestic resource mobilisation, which ultimately prompts the government to go for higher amounts of debt, the Policy Research Institute of Bangladesh (PRI) said on Monday.

"Such a situation in revenue collection is going on year after year. External debts are growing fast, as a consequence," PRI Research Director MA Razzaque said in a discussion programme at its office in the capital.

It reached about $96 billion in FY22 from less than $40 billion in FY15, he added.

"Enhanced domestic resource mobilisation is a must for repaying the debts as well as having optimum allocations for health, education, social safety and other areas which are crucial particularly for poor people."

Public expenditures even in lower middle-income countries are more than 24% of GDP while it is only 13% in Bangladesh due to lack of the resources, MA Razzaque said.

The researcher suggested the NBR provide easy and seamless services to the taxpayers through digitalisation and automation for achieving optimum tax-GDP ratio.

"Bangladesh's tax-GDP ratio has decreased to 8% from 11-12% in the last few years due mainly to the lack of policy reforms," PRI Executive Director Ahsan H Mansur said. "However, our tax officials would not allow the changes as they feel comfortable working with the existing system."

He said that Bangladesh's tax admiration remained the same as colonial era and no fundamental changes had taken place in the tax laws except that related to value added tax.

"Nowadays, there is no existence of face to face communication between taxpayers and tax officials in the world but Bangladesh is far away from that," Mansur said. "The face-to-face communication hampers neutrality and objectivity of tax officials."   

PRI Director Bazlul Haque Khondker said if the tax revenue could be increased to 13.5% of GDP the real GDP would increase by 3.3% and headcount poverty would fall by 2.2 percentage point.

"The current low tax effort is a key impediment to adequate expenditure on the social sector as well as infrastructure in Bangladesh."

PRI chairman Zaidi Sattar suggested the government go for reducing trade tax. "The existing tax policy is hindering the potential of Bangladesh to become a trading nation."