Low revenue-GDP ratio hurting economy of Bangladesh.

[Homo Sapiens]

Low revenue-GDP ratio hurting economy​

Golam Mortaza | Published: May 25, 2022 21:10:26

---

In a recent article at an English Daily, renowned economist Professor Wahiduddin Mahmud tried to point out the structural problem of continued low level of revenue-GDP ratio in Bangladesh. He argued that the country's 'tax-GDP ratio, which is one of the lowest among our comparator countries, has remained the Achilles' heel of our budgetary management, only to be more openly exposed by the fallout of the pandemic and the impact of the ongoing global economic turbulence.'

A number of critics came down on the economist saying that he is bringing the revenue issue at the front when the economy is grappling with many other issues: rising inflation, falling foreign exchange reserves and then exchange rate, rising current account deficit, etc.

Though the issues raised by the critics are valid, they probably missed an important aspects of Wahiduddin Mahmud's article. It is the structural weakness of the economy raised by him and there is no doubt that low level of revenue-GDP ratio is behind the prolonged structural weakness of the county.

In the last one and half decade, revenue-GDP ratio remained stagnant at roughly about 9.0 per cent in Bangladesh and that's probably one of the lowest in the world.

The sources of many economic problems in Bangladesh including those are being discussed lie in low revenue level.
Take the example of rising government borrowing. This is the most talked about topic in the country recently. When revenue is the only source of the government's income, a low revenue leads it to borrow more from both domestic and foreign sources. While borrowing from the domestic sources will push money supply up, which is partly inflationary. And if the borrowing is from the external sources, it will raise the country's external debt, leading to vulnerability in external account. In fact, concerns related to depleting foreign exchange reserves could be less with lower level of external borrowing, lower import for externally funded projects and all.

Weak social security system is another concern. Bangladeshis are probably enjoying one of the weakest and weakly-targeted social security systems globally. With low level of revenue, the government can hardly think about extending it to the fullest expected level. People may debate the issue of trade-off between weakly necessary and overly budgeted infrastructure projects and necessary social security system, that probably deserves another discussion.

Then there is weak management of inflation. A government with strong revenue level is more capable of managing inflation. Against the inflationary pressures on the poor, the government could probably respond more strongly by extending necessary social safety net if its hands were not bound with revenue shortage. And, reducing import duty could be another option to tame import-related inflation, rising due to high import prices and exchange rate depreciation, but that's not also largely possible as import duty is the largest component of the already squeezed revenue level. As mentioned earlier, high revenue could also give the government space for not borrowing more from domestic sources which could be a major structural solution for inflation management.

These are just few examples, and the list can be extended more. So what is necessary is to understand the structural macroeconomic problems before jumping into any conclusion.

The writer is an economist.

Low revenue-GDP ratio hurting economy

In a recent article at an English Daily, renowned economist Professor Wahiduddin Mahmud tried to point out the structural problem of continued low level of revenue-GDP ratio in Bangladesh. He argued that the country's 'tax-GDP ratio, which is one of the lowest among our comparator countries, has...

thefinancialexpress.com.bd

 

[bluesky]

People will dislike me more if I say the total tax collection is good. But, it is compared with the faulty or inflated GDP figures.

If the GDP is $400 billion, the tax vs GDP becomes somewhere above 8%. But, the ratio is 16% if the GDP is $200 billion.

So, ask BBS to deduct inflation from the nominal growth, and the yearly growth will be less than 3%. Every year Hasina Bibi asked the BBS to inflate the growth rates and mow she is in problem and asking others to extend special benefits until 2029.

This woman has a 2-year degree from Eden College with grace marks. So , she has little knowledge on the national economic development process.

Where is @Black_cats?

 

[BananaRepublicUK]

People will dislike me more if I say the total tax collection is good. But, it is compared with the faulty or inflated GDP figures.

If the GDP is $400 billion, the tax vs GDP becomes somewhere above 8%. But, the ratio is 16% if the GDP is $200 billion.

So, ask BBS to deduct inflation from the nominal growth, and the yearly growth will be less than 3%. Every year Hasina Bibi asked the BBS to inflate the growth rates and mow she is in problem and asking others to extend special benefits until 2029.

This woman has a 2-year degree from Eden College with grace marks. So , she has little knowledge on the national economic development process.

Where is @Black_cats?

If GDP figures were fake it would have been exposed during covid.

How can a mere 200 billion dollar economy have:

1. 40 billion dollar deposited in US treasury as foreign reserves THAT’S ALMOST OLIGARCHIC RETURNS

2. 50 billion in exports - are you saying we export a quarter of our GDP HAHAHA

3. 90 billion in imports - are you saying half of our GDP is made up of imports - WHILST MAINTAINING a HEFTY 40 billion reserves HAHA

That’s almost Nilgiri level of trolling!!!!


Bangladesh sailed through covid whilst India suffered a genocide.

And ignore the socialist talking heads and their fetish for taxes.

Bangladesh should be proud of its low tax economy. Let people keep most of their money. Bangladeshis donate generously and our NGOs are world renowned. Don’t stifle those traits by choking taxes.

Give them plastic dolls to play with. Works for the Japanese!

Btw, the women with a two year Eden college degree did rather well protecting her country from covid. Much better than Oxford educated Boris!!! Or chaiwala modi!

 

[pikkuboss]

People will dislike me more if I say the total tax collection is good. But, it is compared with the faulty or inflated GDP figures.

If the GDP is $400 billion, the tax vs GDP becomes somewhere above 8%. But, the ratio is 16% if the GDP is $200 billion.

So, ask BBS to deduct inflation from the nominal growth, and the yearly growth will be less than 3%. Every year Hasina Bibi asked the BBS to inflate the growth rates and mow she is in problem and asking others to extend special benefits until 2029.

This woman has a 2-year degree from Eden College with grace marks. So , she has little knowledge on the national economic development process.

Where is @Black_cats?

As a Bangladeshi, you should be proud that Bangladesh has higher GDP nominal per capita than India.

 

[Homo Sapiens]

People will dislike me more if I say the total tax collection is good. But, it is compared with the faulty or inflated GDP figures.

If the GDP is $400 billion, the tax vs GDP becomes somewhere above 8%. But, the ratio is 16% if the GDP is $200 billion.

So, ask BBS to deduct inflation from the nominal growth, and the yearly growth will be less than 3%. Every year Hasina Bibi asked the BBS to inflate the growth rates and mow she is in problem and asking others to extend special benefits until 2029.

This woman has a 2-year degree from Eden College with grace marks. So , she has little knowledge on the national economic development process.

Where is @Black_cats?

Bangladesh's export, import, forex volume does not indicate that it has GDP only 200 billion Dollar. How come a South Asian country with mere 200 billion Dollar GDP manage to export 58 billion and import 90 billion? (projected for this fiscal). Bangladesh is not Vietnam. It is a South Asian country who are characterized by low integration with global trade. The scale of foreign trade and forex reserves just do not match with 200 billion Dollar GDP. We should accept the bitter reality that, our tax collection is among the lowest in the world. Even just halting the tax break and waiver for some industries and service sectors will push our tax GDP ratio from 8 to 17 percent according to media reports. Bangladesh's GDP can not be less than 400 billion Dollars.

Besides, foreign trade and forex, Bangladeshi people's income, spending and living standard do not indicate that it's GDP is only 200 billion Dollar and per capita just 1200 Dollars. BBS might be inflating somewhat, but they are not good enough to inflate it 100% and fool IMF, World Bank and others. IMF, World Bank do not publish data of Cuba, North Korea, and some other countries where GDP calculation is in doubt. There is no reason for them to do the otherwise for Bangladesh if GDP number were really that screwed.

 

[EasyNow]

Don't know why articles like this keep popping up recently - there's a trend to force BD to push taxes up.

And so what if we have a large GDP, it doesn't mean BD is rich - our profit margins are razor thin. We are doing high volume, low margin products - so sales numbers shouldn't be taken at face value.

 

[BananaRepublicUK]

Don't know why articles like this keep popping up recently - there's a trend to force BD to push taxes up.

And so what if we have a large GDP, it doesn't mean BD is rich - our profit margins are razor thin. We are doing high volume, low margin products - so sales numbers shouldn't be taken at face value.

Bangladesh’s “talking heads” are heavily influenced by the communists of West Bengal. And now funded by Hinduvta dogs!

Their agenda is to cripple BD with high taxes!!!

 

[Indos]

All developing countries has this low tax to GDP ratio. It needs improvement in enforcement to make it higher.

 

[rainbowrascal]

In fy20 Bangladesh collected tax worth 25bn (2.18 lakh crore) and exempted tax worth 28.5bn (2.5 lakh crore). This tax exemption is the single big reason why our tax to gdp is really low. The other reasons are lack of diversification in tax sector, lack of digitalization which causes tax theft etc. Our tax to gdp ratio would be double if this wasn't the case.

Now we can double this in no time if we collect the tax and give it back to as subsidy (show it as expenditure). This will boost business trust in govt. But it can't be a long term solution.

What we defenitely should do is slowly move away from exemptions, digitalize it and broaden the tax secror.

 

[Mahabahu kaunteya]

I

People will dislike me more if I say the total tax collection is good. But, it is compared with the faulty or inflated GDP figures.

If the GDP is $400 billion, the tax vs GDP becomes somewhere above 8%. But, the ratio is 16% if the GDP is $200 billion.

So, ask BBS to deduct inflation from the nominal growth, and the yearly growth will be less than 3%. Every year Hasina Bibi asked the BBS to inflate the growth rates and mow she is in problem and asking others to extend special benefits until 2029.

This woman has a 2-year degree from Eden College with grace marks. So , she has little knowledge on the national economic development process.

Where is @Black_cats?

I don't know much about economics but government should collect money other than all sorts of taxes by directly asking the citizenery to pay it

 

[EasyNow]

Bangladesh’s “talking heads” are heavily influenced by the communists of West Bengal. And now funded by Hinduvta dogs!

Their agenda is to cripple BD with high taxes!!!

Yes unsolicited advice from haters is worthless.

 

[Black Tornado]

If GDP figures were fake it would have been exposed during covid.

How can a mere 200 billion dollar economy have:

1. 40 billion dollar deposited in US treasury as foreign reserves THAT’S ALMOST OLIGARCHIC RETURNS

2. 50 billion in exports - are you saying we export a quarter of our GDP HAHAHA

3. 90 billion in imports - are you saying half of our GDP is made up of imports - WHILST MAINTAINING a HEFTY 40 billion reserves HAHA

That’s almost Nilgiri level of trolling!!!!


Bangladesh sailed through covid whilst India suffered a genocide.

And ignore the socialist talking heads and their fetish for taxes.

Bangladesh should be proud of its low tax economy. Let people keep most of their money. Bangladeshis donate generously and our NGOs are world renowned. Don’t stifle those traits by choking taxes.

Give them plastic dolls to play with. Works for the Japanese!

Btw, the women with a two year Eden college degree did rather well protecting her country from covid. Much better than Oxford educated Boris!!! Or chaiwala modi!

So Bangladesh will have $140 bn of trade in this fiscal, while we had $1.4 trillion worth trade last fiscal which is projected to reach more than $1.7 trillion this year. While we maintain almost $600 billion forex reserves while you maintain $40 bn of those. SO…?

And strong economy ≠ less covid cases and fatalities.

So if exports, imports are a good measure of economic size, then your’s is still much behind us even on a per capita basis.

 

[BananaRepublicUK]

So Bangladesh will have $140 bn of trade in this fiscal, while we had $1.4 trillion worth trade last fiscal which is projected to reach more than $1.7 trillion this year. While we maintain almost $600 billion forex reserves while you maintain $40 bn of those. SO…?

And strong economy ≠ less covid cases and fatalities.

So if exports, imports are a good measure of economic size, then your’s is still much behind us even on a per capita basis.

Nooooo!!!!!

BD is marginally ahead on the basis of GDP.

India far ahead on the basis of GNP. India has humongous multinationals repatriating profits. I do business with one of those giants!!!

It’s not that difficult to understand really!!!

@UKBengali
@bluesky
@Homo Sapiens
@Black_cats
@Bilal9
@EasyNow
@Wergeland

Nooooo!!!!!

BD is marginally ahead on the basis of GDP.

India far ahead on the basis of GNP. India has humongous multinationals repatriating profits. I do business with one of those giants!!!

It’s not that difficult to understand really!!!

@UKBengali
@bluesky
@Homo Sapiens
@Black_cats
@Bilal9
@EasyNow
@Wergeland

Btw, those multinationals were a product of the British empire not “independent India”.

 

[pikkuboss]

Btw, those multinationals were a product of the British empire not “independent India”.

You mean the Services sector and largest IT companies of 250 billion were built by the British?

 

[UKBengali]

Nooooo!!!!!

BD is marginally ahead on the basis of GDP.

India far ahead on the basis of GNP. India has humongous multinationals repatriating profits. I do business with one of those giants!!!

It’s not that difficult to understand really!!!

@UKBengali
@bluesky
@Homo Sapiens
@Black_cats
@Bilal9
@EasyNow
@Wergeland




Btw, those multinationals were a product of the British empire not “independent India”.

Not sure whether the person you replied to was trolling or just lacking in knowledge.

Let us take BD and Vietnam as examples:

BD GDP - 400 billion US dollars
Trade volume - 140 billion US dollars

So BD has a nearly 3:1 ratio in GDP:Trade


Vietnam GDP - 405 billion US dollars
Trade volume - 650 billion US dollars.

So Vietnam has a 2:3 ratio in GDP:Trade



What is the reason for this discrepancy? It is because a lot of Vietnam's imports and exports are multinationals like Apple, Samsung etc that are using the cheap labour and good infrastructure in Vietnam to assembly their products to ship to the rest of the world. There is little value-add in Vietnam itself and so not reflected in their GDP.


BD is quite unique as it's manufacturing exports have a very high value add compared to every other developing Asian countries. This is the model that was successfully employed by S. Korea and Taiwan to transition from 3rd world to 1st world in 50 years.