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Questionable BBS GDP Statistics

damiendehorn2

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I don’t think a “radical hindu mullah” is in charge, just because you think so he is doesn’t make him one. Your concern would’ve made sense if a Bajrang Dal guy became PM as they’re indeed far right wing guys, BJP ones are normal right wing. I was just saying what most people in India think and also said, don’t take it otherwise.
To us BJP is a radical hindu mullah.
 

Wergeland

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There is absolutely no way to predict where the world will be in 2040. Pakistan is able to achieve all of this despite having 2000Km border with the most unstable country in the world. I would have loved to see what BD did if faced with 10 million refugees and a share a border with a country that has been at war for 50 odd years.

Despite all of that today our startup market is one of the fastest in asia , we just exported our first SUV and our exports have increased by 40%.

While it is true that Pakistan exist in a geographically more challenging neighborhood, all the factors that creates a burden upon it, could also be seen as a advantage.

By implementing the right policies at the right time, Pakistan on paper should have had more dividend from it.
 

Destranator

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What really drives our low tax-to-GDP ratio!

Issues surrounding inflated GDP data has made Bangladesh’s Debt-to-GDP and tax-to-GDP ratio the lowest in South Asia​

Infographic: TBS

Infographic: TBS


A mid-term macroeconomic policy statement of the Ministry of Finance shows that the tax-to-GDP ratio for the five years from 2017 to 2020 was on average 9.9% which was 10.2% in the previous report. This rate is the lowest among SAARC countries, less than half of Nepal. Even the tax-to-GDP ratio of war-torn Afghanistan is better than that of Bangladesh.
For the poor tax-to-GDP ratio, several elements are being blamed. Limited tax coverage, peripheral deficits, tax exemptions, tax evasion, litigation, deductions, corruption in depositing collected tax, lack of skilled manpower, technical incompetence, poor monitoring system, etc. are in discussion, yet not in the solution process.

In the financial year 2010-11, the revenue collection was about Tk80,000 crore. But in 2021-22, the revenue collection will be around Tk3,00,000 crore. In just ten fiscal years, the revenue collection almost quadrupled.
While there are certainly issues with the tax policy, collection and enforcement regime in Bangladesh, there may be more to the picture than initially revealed.

Firstly, questions can be raised regarding the GDP accounts. Why? The government's growth rate is not consistent with that of the World Bank (WB). After a delay of almost a year and a half, the BBS had to reduce its FY19-20 GDP growth figures by 1.73% in the face of objections from the WB, IMF, and domestic research institutes.
Then there's the issue of rebasing. Bangladesh's per capita income rose by $327 as BBS updated the base year for GDP calculation. However, the main purpose of the rebasing is to simplify the calculation of GDP, not to increase growth and national income. And the nine new sectors included during rebasing had already contributed to the GDP in either the agriculture, industry or services sectors.
According to economists, the BBS does not accurately subtract inflation from the figures for national income, labour income, household income, etc., resulting in higher domestic growth.
On March 4 2022, South Asian Network for Economic Modelling (SANEM) questioned the BBS's inflation data by publishing its survey data. According to SANEM, the average year-on-year food inflation in February this year for the urban marginalised groups was 12.46% which is considerably higher than the official estimate of 5.22%. Such underestimation of the inflation rate can inflate the real GDP as well.
That is, multi-level data distortion might be one of the factors contributing to a low tax-to-GDP ratio.
Furthermore, because of the potentially inflated GDP numbers, the debt-to-GDP ratio is always quite low despite the country's rising external debt. According to Bangladesh Bank, the country's total public-private external debt is $90.69 billion by end of CY2021, yet it is said that our debt-to-GDP ratio is negligible.
If one of two economic ratios is satisfactory, while the other extremely dissatisfactory, it indicates there are issues surrounding the common element between them. In other words, it's the inflated GDP data that made both the Debt-to-GDB and tax-to-GDP ratio lower.
The declining tax-to-GDP ratio is a widely discussed economic issue in the country. What is not discussed is the question of political malpractice around taxation, administrative accountability, and multistage political and administrative extortions.
We have been successful in reforming the income tax collection system at the sources of monthly salary. But corruption prevails in the foreign currency loan-based revenue system modernisation projects.
Incompetent foreign companies have been given the task of modernising technical revenue collection and processing infrastructure. There is recklessness in buying expensive EFD machines for VAT collection without emphasising the end-to-end payment system.
The poor rate of tax collection in Bangladesh is directly linked to our political and administrative malpractices. Politicians, businessmen, and industrialists evade taxes using their positions and tax inspectors are helpless to them.
In addition, political and bureaucratic influencers are placed on the boards of trustees of various organisations, creating a 'conflict of interest' in tax collection. Tax inspectors can hardly reach out to those organisations or companies.
The private sector in Bangladesh continues to evade income tax year after year by associating influential people with the management of the organisation. From reputed companies to private educational institutions, no one is exempt from this malpractice.
Another problem is the NGO-type model of business operations. Income tax evasion is very common in the Bangladeshi private sector by showing ambiguous costs, that the company's dividends are fully spent on various management domains including salary, allowance, development, entertainment, training, transportation, and social expenditure. Amazingly, the majority of the companies run on loss year after year.
Although it is difficult to collect direct income tax from large and medium businesses, the government tactfully collects the tax indirectly from VAT. VAT is always an indirect tax. Everything except rice, pulses, and vegetables is subject to VAT.
There are other discrepancies in the taxation policy as well. For instance, the tax-free income limit in Bangladesh is only three lakh takas. But even in India, it has been 5 lakh rupees for a long time. While prices are soaring beyond the reach of ordinary citizens in 2022, the government made more revenue by increasing the import duty.
Although the direct income tax is low, the rate of duty and VAT in Bangladesh is almost the highest in this region. But corruption runs rampant in the manual VAT collection system. With and without the assistance of VAT inspectors, traders and retailers can evade the amount of VAT paid by the buyer.
Unfortunately, the government is yet to design a proper payment system to know the actual amount of VAT paid from the source. Consequently, a significant portion of the collected VAT is being looted by corrupt officials and their accomplices.
The adoption of cashless transactions also appears to be slower than expected. People withdraw cash from ATMs either to purchase, to deposit to mobile banking wallets, to transfer to a second party mobile account, or to make payments.
We are still unable to achieve the seamless flow of electronic fund transfer among mobile and classical banking systems. Moreover, the cost of electronic transactions remains high and is one of the primary reasons for reluctance in adopting it. So, cash payment remains the obvious choice. Sadly, cash transactions also help people widely to bypass the taxation system.
Extortion is the biggest indirect tax in the country. Traders, shopkeepers, vehicles, freight trucks, and even hawkers are all forced to pay extortion. There are arguments that small and medium businesses in Bangladesh are not willing to pay income tax, because they are forced to pay massive extortion fees at various levels. It is also one of the reasons why the price of our commodities and production costs are so high.
Bangladesh's tax-to-GDP ratio is as low as 10%. But it is consistent with the size of the formal economy which constitutes about 11% of the economy. To increase the tax-to-GDP ratio, the country's formal sector needs to be enlarged.
According to the International Labour Organisation (ILO), the average monthly salary in various unskilled and low-skilled labour sectors in Bangladesh is only $48. Readymade garment workers earn a maximum of $100, the lowest in South Asia. How can people pay taxes with such a low income? How can you intend to collect higher tax rates in the informal sector, which accounts for 89% of the country's total labour market?
Then comes the issue of digitisation. Without sensible digitisation of the payment system, it would be difficult to alleviate corruption and improve tax collection.
Moreover, the taxmen should prioritise tax evasion by the large corporations and high-income earners to stop income tax evasion.
The taxation rate in Bangladesh is not vertical rather than horizontal. As the direct taxes from the rich and merchant classes are low, the government continues to impose a heavy burden of indirect taxes on the general middle class, lower class, and marginalised economic classes by imposing VAT, import taxes on daily necessities and other surcharges.
In this way, the tax collection process in Bangladesh is structurally unfair and it cannot be allowed to go on.
 

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