Abstract.
Tax is a mandatory payment collected by the government of a country to spend
after the betterment of the country. There are two types of taxes, direct and
indirect. In this paper we aim to understand the contribution of indirect tax in the
economic growth of Bangladesh. What are its positive and negative effects in the
economy.
The objective of this paper is to analyse and describe the contribution of indirect
tax such as vat, Customs Duty to this countries economic growth.
Finding and Analysis.
The analysis of this study is conducted by comparing the data collected from
various trusted websites and articles which specializes in reporting about
economic state of Bangladesh. Indirect tax is a type of tax, its burden lies with
the end user of a product it is collected by the seller from the consumer. The seller
collects it and then forwards the amount to the government with a tax return. In
the fiscal year of 2023 – 2024 all the businesses operating in Bangladesh will
have to submit vat return each month.
In a developing country like Bangladesh the income tax avoidance rate is very
high. In the last fiscal year only 1.4 % of people filed tax returns, and in India this
percentage was 5.8%. Here is a chart showing the tax revenue generated in the
south Asian countries from 1980 to 2018.
Here we can see even in the south-east Asian countries Bangladesh generated the
least amount of tax. There are two major reasons behind it, one is corruption and
the other is willingness to pay tax. Revenue generated from collecting tax also
indicates how much the people of the country trusts its government. And tax
evasion is mostly done with corruption as a tool.
In this circumstance tax revenue cannot bee collected by the government as they
want to because the people are unwilling to pay. So, to solve this problem indirect
taxes are charged heavily. Because there is no way to evade the indirect tax. The
NBR collected 301633 crore taka as VAT and other indirect taxes in the year 2022,
which is approximately 67% of the whole amount of tax collected that year. It is
because indirect taxes are collected from the end consumer and the tax is added
to the final price of a product that is why this is unavoidable.
For a sustainable economic growth, the government needs to collect its targeted
tax amount or else they will fail to finance the necessary activities to keep a
country running. Bangladesh is now under pressure by the international Monetary
Fund to collect more tax. The IMF has given a loan of a sum of 4.7 Billion US
Dollars. And they are pressurising to reform the tax structure of Bangladesh as a
condition of the loans provided. As the government still can not get majority of
the individual tax payers to submit tax returns so the government will be
depending on the indirect tax to generate greater revenue.