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Tax to GDP ratio 7.5%, lowest in world: Planning minister

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Tax to GDP ratio 7.5%, lowest in world: Planning minister

ECONOMY

TBS Report
01 December, 2022, 12:50 pm
Last modified: 01 December, 2022, 03:47 pm


Tax to GDP ratio 7.5%, lowest in world: Planning minister


The tax-to-GDP ratio of Bangladesh is 7.5%, which is the lowest among all the countries in the world, said Planning Minister MA Mannan.

The minister made the statement during his speech as the chief guest at the opening session of the three-day Annual Bangladesh Institute of Development Studies (BIDS) conference on Post-Covid Challenges in an Uncertain and Divisive World.

A total of 13 academic papers, five book discussions, and 12 keynote speeches from home and abroad will be presented at the conference, said Dr Binayak Sen, director general of the BIDS.

About the tax-to-GDP ratio the Planning minister said, "It is worse than the worst. But how did the economy grow so much? So, is there any other thing to offset it [lack of tax return]?"

Increasing the tax ratio is not possible overnight, he added saying that the prime minister asked to increase the number and quality of researches.


To stabilise the economy, he recommended removing limits on interest rates, leaving currency exchange rates upon the market system.

However, the special guest of the programme, State Minister for Planning Dr Shamsul Alam commented that the GDP growth rate will exceed 7% this time.

He said that the country is doing well in all indicators including private sector loans, investment Foreign direct investment (FDI).

However, in the context of current inflation, he recommended increasing the interest rate to 9-12% instead of 6-9% to protect the interest of the depositors.

Abdur Rouf Talukder, governor of Bangladesh Bank, said at the event that, Bangladesh is among the few countries which provided stimulus to prevent loss resulting from the pandemic. Bangladesh was one of the top 5 countries in terms of combatting Covid-19.

The inflation increased due to dependence on imports and an increase in the cost of production. The government is currently trying to reduce imports and increase production, said the central bank governor.

He said that the government is not preventing imports. Only imports of unnecessary and luxury goods were banned. The Bangladesh Bank blocked some LCs due to over-invoicing and under-invoicing.

He also said, "We have huge potential of earning more remittance and the potential remains under-explored due to hundi. Policing is not the proper way to reduce hundi but reducing cost is."

He presented some initiatives of the central bank in this regard.

Dr Sadiq Ahmed presented the keynote titled "Macroeconomic management in a post-Covid uncertain global environment" at the event.

He said that the economy of Bangladesh achieved significant development in many socio-economic indicators since Independence.

The economy achieved remarkable growth in the last decade. But the Covid crisis reverted the momentum, he added.

The war Between Russia and Ukraine pushed the economy to further challenges and delayed recovery from Covid 19.

He said that about 6% economic growth for the upcoming fiscal would be remarkable for Bangladesh considering global and local perspectives.

He proposed compromising some level of economic growth to ensure macroeconomic stability.
 
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Tax to GDP ratio 7.5%, lowest in world: Planning minister

ECONOMY

TBS Report
01 December, 2022, 12:50 pm
Last modified: 01 December, 2022, 03:47 pm


Tax to GDP ratio 7.5%, lowest in world: Planning minister


The tax-to-GDP ratio of Bangladesh is 7.5%, which is the lowest among all the countries in the world, said Planning Minister MA Mannan.

The minister made the statement during his speech as the chief guest at the opening session of the three-day Annual Bangladesh Institute of Development Studies (BIDS) conference on Post-Covid Challenges in an Uncertain and Divisive World.

A total of 13 academic papers, five book discussions, and 12 keynote speeches from home and abroad will be presented at the conference, said Dr Binayak Sen, director general of the BIDS.

About the tax-to-GDP ratio the Planning minister said, "It is worse than the worst. But how did the economy grow so much? So, is there any other thing to offset it [lack of tax return]?"

Increasing the tax ratio is not possible overnight, he added saying that the prime minister asked to increase the number and quality of researches.


To stabilise the economy, he recommended removing limits on interest rates, leaving currency exchange rates upon the market system.

However, the special guest of the programme, State Minister for Planning Dr Shamsul Alam commented that the GDP growth rate will exceed 7% this time.

He said that the country is doing well in all indicators including private sector loans, investment Foreign direct investment (FDI).

However, in the context of current inflation, he recommended increasing the interest rate to 9-12% instead of 6-9% to protect the interest of the depositors.

Abdur Rouf Talukder, governor of Bangladesh Bank, said at the event that, Bangladesh is among the few countries which provided stimulus to prevent loss resulting from the pandemic. Bangladesh was one of the top 5 countries in terms of combatting Covid-19.

The inflation increased due to dependence on imports and an increase in the cost of production. The government is currently trying to reduce imports and increase production, said the central bank governor.

He said that the government is not preventing imports. Only imports of unnecessary and luxury goods were banned. The Bangladesh Bank blocked some LCs due to over-invoicing and under-invoicing.

He also said, "We have huge potential of earning more remittance and the potential remains under-explored due to hundi. Policing is not the proper way to reduce hundi but reducing cost is."

He presented some initiatives of the central bank in this regard.

Dr Sadiq Ahmed presented the keynote titled "Macroeconomic management in a post-Covid uncertain global environment" at the event.

He said that the economy of Bangladesh achieved significant development in many socio-economic indicators since Independence.

The economy achieved remarkable growth in the last decade. But the Covid crisis reverted the momentum, he added.

The war Between Russia and Ukraine pushed the economy to further challenges and delayed recovery from Covid 19.

He said that about 6% economic growth for the upcoming fiscal would be remarkable for Bangladesh considering global and local perspectives.

He proposed compromising some level of economic growth to ensure macroeconomic stability.

Low tax to GDP is excellent.

This has been the key to the success under Hasina.

More money the government has the bigger the civil service and subsidies get.

All infra should be privately built and funded.

That also ensures only commercially viable infra gets built.

In future get the lenders to finance and own the infra. E.g. China can build and own ports it builds. Ditto, future nuclear power stations built by Russia.
 

mb444

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Over 90% of tax is generated from Dhaka and Chitagong. It is time to widen the tax net across the country. Other regions have had good development and it is time they do their part.
 

Homo Sapiens

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Low tax to GDP is excellent.

This has been the key to the success under Hasina.

More money the government has the bigger the civil service and subsidies get.

All infra should be privately built and funded.

That also ensures only commercially viable infra gets built.

In future get the lenders to finance and own the infra. E.g. China can build and own ports it builds. Ditto, future nuclear power stations built by Russia.
There should be a right balance of Tax and GDP ratio. Not as high as European countries, but also not as low as Bangladesh. A lot of infrastructure need public money or foreign money which govt. has to pay from tax. Big transport infrastructure, ports, powerplants, industrial units etc. are easy to build by private sectors and they can collect toll or higher selling price to recover it, but others need govt. money, think about village roads, hospitals, schools, social security. If govt. don't build these, poor people will be excluded from receiving a lot of vital life supports. Very low tax collection and spending by govt. widen inequality and hamper sustainable development. Bangladesh's tax to GDP ratio should be similar to countries like Vietnam, China etc. which are not too high but also not too low where govt. can fund a lot of vital developmental projects from its own money and don't always have to run to foreign lenders to implement any big project which Bangladesh govt. is fond of.
 
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UKBengali

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There should be a right balance of Tax and GDP ratio. Not as high as European countries, but also not as low as Bangladesh. A lot of infrastructure need public money or foreign money which govt. has to pay from tax. Big transport infrastructure, ports, powerplants, industrial units etc. are easy to build by private sectors and they can collect toll or higher selling price to recover it, but others need govt. money, think about village roads, hospitals, schools, social security. If govt. don't build these, poor people will be excluded from receiving a lot of vital life supports. Very low tax collection and spending by govt. widen inequality and hamper sustainable development. Bangladesh's tax to GDP ratio should be similar to countries like Vietnam, China, India which are not too high but also not too low where govt. can fund a lot of vital developmental projects from its own money and don't always have to run to foreign lenders to implement any big project which Bangladesh govt. is fond of.


BD government should now be at 15-20% of GDP and should aim for 25-30% by mid-century.

That would strike the right balance.
 
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There should be a right balance of Tax and GDP ratio. Not as high as European countries, but also not as low as Bangladesh. A lot of infrastructure need public money or foreign money which govt. has to pay from tax. Big transport infrastructure, ports, powerplants, industrial units etc. are easy to build by private sectors and they can collect toll or higher selling price to recover it, but others need govt. money, think about village roads, hospitals, schools, social security. If govt. don't build these, poor people will be excluded from receiving a lot of vital life supports. Very low tax collection and spending by govt. widen inequality and hamper sustainable development. Bangladesh's tax to GDP ratio should be similar to countries like Vietnam, China, India which are not too high but also not too low where govt. can fund a lot of vital developmental projects from its own money and don't always have to run to foreign lenders to implement any big project which Bangladesh govt. is fond of.

What you describe is an outdated model.

You don’t want to end up like India where their formal sector is massively taxed. Which has resulted in a massive informal sector that does not provide job security. And you saw the result during covid when people were thrown in the scrap heap.

In a globalised world - money is moved around at a click of a button.

Taxes above 15% will destroy a country like Bangladesh.

Bangladesh has to develop through private investment.

There is no reason for the state to build schools, universities or main highways.

I agree government needs to build stuff at the margins e.g. rural and local roads. But these should be funded through charges on vehicles and fuel not taxes on income.

Only basic necessities like primary health care, defence and basic administrative functions of a state should be funded via taxes on Income.
 

bluesky

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BD government should now be at 15-20% of GDP and should aim for 25-30% by mid-century.

That would strike the right balance.
You are good teacher who love to forecast in the future. Yes, by your suggestions, BD to become gold plated in 2030.

How about forecasting on 2023? How much revenue Hasina Bibi will collect next year?!
 
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You are good teacher who love to forecast in the future. Yes, by your suggestions, BD to become gold plated in 2030.

How about forecasting on 2023? How much revenue Hasina Bibi will collect next year?!

Unlike you, he has a good track record 🤣🤣🤣

Covid being the standout 🤣🤣🤣
 

bluesky

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Stop falsifying the GDP data to double it and the GDP will fall. The tax-GDP ratio automatically becomes 15% from the present 7.5%.

15% is a manageable figure.
 

Turingsage

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I am not sure this is entirely a bad thing. Low tax gives more money to individuals to spend and invest in micro businesses. They are best placed to judge such mall investments creating a climate of enterprise.
Low tax also means if needs be then govts can raise taxes without too much pain leading to discontent. ie govt has greater room for fiscal manoeuvre.
Here in Britain high earners pay 40% tax plus Capital gains tax plus inheritance tax etc. Room for taxing more is constrained.
 

UKBengali

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What you describe is an outdated model.

You don’t want to end up like India where their formal sector is massively taxed. Which has resulted in a massive informal sector that does not provide job security. And you saw the result during covid when people were thrown in the scrap heap.

In a globalised world - money is moved around at a click of a button.

Taxes above 15% will destroy a country like Bangladesh.

Bangladesh has to develop through private investment.

There is no reason for the state to build schools, universities or main highways.

I agree government needs to build stuff at the margins e.g. rural and local roads. But these should be funded through charges on vehicles and fuel not taxes on income.

Only basic necessities like primary health care, defence and basic administrative functions of a state should be funded via taxes on Income.




25-30% by mid-century would strike a good balance. This is the ideal level for the country that BD wants to be.

BD is a capitalist country with a collective mindset. There will always be huge numbers of people that cannot afford decent schooling and healthcare and so the government will need to provide this. No country is immune to income inequality like this.

Also you do not want vital infrastructure like power in the hands of a foreign country. BD nuclear and other power stations must be owned and operated by BD itself.

Scandinavian countries have some of the highest living standards in the world and they collect like 50% of GDP in tax!
 

bluesky

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I am not sure this is entirely a bad thing. Low tax gives more money to individuals to spend and invest in micro businesses. They are best placed to judge such mall investments creating a climate of enterprise.
Low tax also means if needs be then govts can raise taxes without too much pain leading to discontent. ie govt has greater room for fiscal manoeuvre.
Here in Britain high earners pay 40% tax plus Capital gains tax plus inheritance tax etc. Room for taxing more is constrained.
When industries are absent in a country, poor people remain unemployed or underemployed. Now, tell me how these people can earn money unless the govt spends tax money on many urban and rural infrastructures here and there.

Poor people get work, get salaries and go to markets to buy the necessities. The economy keeps on moving and circulating. When infrastructure is built, demand for construction materials also increases giving more work to the labor people in those sectors.

The construction materials are transported by trucks. So, people in this sector also get jobs to do and wages with it. Low tax collection stops the process and people get poorer and poorer.

This is what is happening in Bangladesh.

I am not familiar with the situation in India. But, I think a low tax collection is causing people there to go unemployed though India is on higher ground in terms of technologies.

A billionaire family does not consume a hundred times more than a poor family. If that money is distributed among many families through taxation of the rich, the market becomes stronger because every family will have the income that supports its purchasing power.
 

Species

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You need bold reforms to streamline the fiscal policy.

The debt-to-GDP ratio has shot up to 40% from less than 20% 15 years ago while tax-to-GDP ratio has remained same. That's a disaster in making!
 
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When industries are absent in a country, poor people remain unemployed or underemployed. Now, tell me how these people can earn money unless the govt spends tax money on many urban and rural infrastructures here and there.

Poor people get work, get salaries and go to markets to buy the necessities. The economy keeps on moving and circulating. When infrastructure is built, demand for construction materials also increases giving more work to the labor people in those sectors.

The construction materials are transported by trucks. So, people in this sector also get jobs to do and wages with it. Low tax collection stops the process and people get poorer and poorer.

This is what is happening in Bangladesh.

I am not familiar with the situation in India. But, I think a low tax collection is causing people there to go unemployed though India is on higher ground in terms of technologies.

A billionaire family does not consume a hundred times more than a poor family. If that money is distributed among many families through taxation of the rich, the market becomes stronger because every family will have the income that supports its purchasing power.

You are a man of the 1960s so have that socialist collectivist top down mindset.

I am a product of the 1980s western mindset. We were taught to be individuals and do things bottom up.

Mujib was a failure on the economic front because he was surrounded by leftists like you!!! His government destroyed whatever entrepreneurial vigour we had. Which has been slowly rebuilt by his daughter in the last decade.
 

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