Vision 2041: Target to double tax-GDP ratio

The government has taken an ambitious target to raise the revenue-GDP (Gross Domestic Product) ratio to 24.1 per cent as it aims to achieve the developed nation status by 2041, officials said on Saturday.

The rapid pickup will be needed to keep the revenue-GDP ratio at an average 18.50 per cent rate annually over the 20 years through fiscal year 2041.

Economists were critical of the ambitious target, saying it will be difficult to expand the country’s internal resources during the period.

The General Economics Division (GED) has recently formulated the Perspective Plan 2041 for Bangladesh to graduate the country’s position.

Bangladesh is one of the least-taxed economies in the developing world as its tax-GDP ratio hovered between 9.0 and 10 per cent of GDP during the last five years.

In FY2020, Bangladesh’s year-on-year Revenue-GDP ratio failed to cross the 10 per cent band.

Meanwhile, the country has failed to fulfill the target to lift the total revenue-GDP ratio to 16.1 per cent in its terminal year of 2020 when the last perspective plan ended.

The GED had set the target for raising the ratio of revenue to GDP to 16.1 per cent in FY2020.

According to the new plan, the total revenue-GDP ratio will have to be expanded by 13.68 percentage points in the next 20 years.

Every year, the revenue to GDP ratio will have to be enhanced by 0.684 percentage points up to 2041.

With 24.15 per cent revenue to GDP ratio target in the terminal year of Vision 2041, the government wants to lift the National Board of Revenue (NBR) tax to 19.85 per cent from the current base of 9.05 per cent.

Besides, it wants to boost the non-NBR tax to 2.0 per cent from the current base of 0.32 per cent and the non-tax revenue to 2.3 per cent from the current base of 1.10 per cent of GDP.

Centre for Policy Dialogue (CPD) research director Dr GK Moazzem said the target of revenue generation is ambitious and difficult to achieve with the current economic base.

While Bangladesh failed to increase its revenue-GDP ratio to even 2.0 percentage points over the last one decade, it would be extremely difficult to boost it to 24.15 per cent in FY2041, he said.

“The government has failed to check the siphoning off of money abroad, bring the undisclosed money and income from the informal economy into the formal accounts. So, it is difficult to improve the revenue generation,” Dr Moazzem said.

Since it is difficult to achieve by 2041, the CPD researcher suggested that the government set the country’s strategy to face the challenges of LDC graduation and become a higher middle income country in the next 10 years.

Huge structural reforms in the NBR and in the government revenue system, and the political willingness are a must for achieving the target, he added

The GED also admitted the growth effects of fiscal operation will depend much on the effectiveness of the revenue mobilisation effort.

To finance growing demand for public investments in infrastructure and other services, it said there should be a strategic shift from heavy reliance on trade tax to the direct taxes and value added tax.


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