Raising direct taxes to 50% could reduce poverty by 1 percentage point: Study
The study also found that poverty among the poorest households could fall by four percentage points from the current 37.2%
A study has found that if the share of direct taxes in Bangladesh's total revenue—currently 33%—can be increased to 50%, the national poverty rate could fall by 1 percentage point.
According to the government's latest data, the current poverty rate stands at 18.7%.
The study by the United Nations High Commissioner for Human Rights (OHCHR) Mission in Bangladesh also states that poverty among the poorest households – now at 37.2% - could decrease by 4 percentage points if direct taxation were raised to the proposed level.
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According to the study, increased direct taxes would boost workers' incomes by 2% and help reduce income inequality.
Bangladesh's current Gini coefficient stands at 0.4999—close to the threshold of extreme inequality. If the share of direct taxes rises to 50%, this could decline to 0.490, indicating a reduction in income inequality.
The study findings were presented on Wednesday at a programme titled, "Taxation to Realise Economic, Social, and Cultural Rights in Bangladesh", held at a hotel in Dhaka.
MD Salay Mostafa, consultant of the OHCHR Mission in Bangladesh, presented the keynote paper, with government officials, experts, and other stakeholders in attendance.
At present, one-third of Bangladesh's tax revenue comes from direct taxes, while two-thirds come from indirect taxes. Direct taxes are paid primarily by higher-income individuals whereas indirect taxes apply to everyone, placing a heavier burden on low-income people.
The study notes that this imbalance exacerbates inequality.
Dr Sayema Haque Bidisha, professor and pro-vice chancellor of Dhaka University, said, "Direct taxation is a tool for bringing down inequality, poverty, price levels, and even inflation."
Dr Muhammad Abdul Mazid, former chairman of the NBR, emphasised the importance of automation in boosting direct tax collection and called for the abolition of the non-refundable minimum tax.
Dr Zaidi Sattar, chairman of the Policy Research Institute (PRI), conducted the programme, while NBR Chairman Abdur Rahman Khan and Huma Khan, head of mission of the OHCHR in Bangladesh, spoke among others.
