Final assignment
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The document discusses the role of taxation in development. Taxation is the biggest source of funding for governments and can be used to reduce inequality and spur infrastructure development. However, Bangladesh's tax-to-GDP ratio of 12% is lower than developing countries which average 15-25%. While Bangladesh's GDP and fiscal expenditure are growing, tax revenue relies too heavily on a few large taxpayers and corruption hinders broader tax collection. Reforms are needed to modernize Bangladesh's tax administration system and encourage more taxpayers.
Final assignment
- 1. FINAL PROJECT TOPIC: ROLE OF TAXATION IN DEVELOPMENT Objective: • To know about the role of taxation in development • To know the Bangladesh perspective of the taxation and development •Tax administration in Bangladesh
- 2. TAXATION AND DEVELOPMENT Taxation is the biggest source of fund for government in many countries. Government may pool money from diversified sources and use for development. Government may use taxation as a tool to reduce gap between rich and poor, i.e. to establish economic equality. The tool may also be used in reducing regional economic gap. On the other hand, the accumulated tax revenue may be used for social and infrastructural development, for example – roads, bridges, schools, universities and so on, that will accelerate overall economic development of a country.
- 3. GDP AND TAXATION: BANGLADESH PERSPECTIVE • Tax – GDP ratio is an important issue in public funding of development. Tax is a vital source of revenue for the development activities of a country. • In general, % of tax to GDP is above 25% for developed countries and between 15% to 25% for developing countries, whereas the percentage for Bangladesh is 12% as per World Bank report of 2011. 0 5 10 15 20 25 Developed country Developing country Bangladesh % of tax to GDP % of tax to GDP
- 4. BANGLADESH GDP GROWTH AND TAXATION Bangladesh’s GDP has been growing consistently in last couple of year. Alongside, tax revenue has been also increasing while tax rate remains stable. On the other hand, it has been found that the majority portion of it’s tax revenue is collected from few corporate houses. A good number of individuals and firms either not paying tax or paying very small amount of tax. This happens mainly because of the corruption and incapacity of tax personnel/authority. As the economy of Bangladesh has been growing, its fiscal expenditure has been growing very rapidly. A comparison of fiscal expenditure is shown in the next slide.
- 5. BANGLADESH GDP GROWTH AND TAXATION Fixcal… 0 100000 200000 300000 2011 2012 2013 2014 Fixcal Expenditure (BDT Billion) Fixcal Expenditure (BDT Billion)
- 6. BANGLADESH GDP GROWTH AND TAXATION As we can see the fiscal expenditure is growing very rapidly, the government need to think very seriously about the generation of fund to finance its revenue and capital expenditure. As the world policy has been changing and developed countries are not in a position to distribute grants generously, developing countries need to think more of internal sources for financing its activities.
- 7. TAX ADMINISTRATION IN BANGLADESH In Bangladesh, people do not find it comfortable to deal with tax personnel and tax system. It is found that the tax personnel mostly approaches to the known zone repeatedly and not exploring new zone or area to expand tax net. On the other hand, people has a tendency to avoid tax personnel or tax system because of their fear of undue harassment or arrangement. It’s also found that it is much cheaper, in most of the time, to manage tax personnel than paying right amount tax. Furthermore, the documentation and information retaining system in Bangladesh has not developed so far yet so that tax and VAT collection may get optimum benefits from it.
- 8. CONCLUSION As the tax can be vital tool for development, there need to be significant reforms to be done in the area of taxation. Introduction of online system may reduce the corruption as it will reduce the scope of tax personnel to do corruption. The innovative ideas, for example – tax fair, may attract more people to get involve in the tax system. Initially, government may need to invest in the system so that documentation and information system get into a reasonable level. Reforms in tax administration by introducing new ideas and innovative people will help to strengthen the tax collection system. Finally, it need to ensure that value for money of public money is attained. It will motivate people to pay tax, at the same time it will ensure development.